Euro Rises as Venizelos Heads to Brussels, ECB and BoE Watched

Euro manages to extend recent rally against dollar and yen even though the Greek situation remains unresolved. Greek officials sounded optimistic as a statement from Prime Minister Papademos said that political leaders have "agreed on all the points of the program with the exception of one which requires further elaboration and discussion." It's believed that pension reform is that stumbling block. Finance Minister Venizelos will travel to Brussels to meet with Eurozone finance ministers today. Venizelos is hopeful that "there is agreement on all issues" with political leaders "bar one". Prime Minister Papademos will stay in Athens striving to complete the austerity deal before EU finance minsters meeting. Before that, focus will first turn to ECB and BoE meetings.

Although Greece's PSI and its access to the new tranche of bailout fund dragged on, market sentiment appeared to have improved since the last ECB meeting. Moreover, reaction to the 3-year LTRO was positive while economic data over the past few weeks showed improvement. These should allow the ECB to keep the main refinancing rate unchanged at 1% and leave the unconventional monetary measures unchanged.

In the UK, the BoE is expected to expand its asset purchases by 50B pound in February. The country's economy has remained subdued and the stubbornly high inflation has started to moderate. Moreover, the previous asset purchase program is about to expire. The February meeting is probably the best timing to extend the amount further.

Employment data from New Zealand was mixed. Q4 employment growth unexpectedly slowed to 0.1% qoq but unemployment rate also dropped to 6.3%. China PPI slowed as expected to 0.7% yoy in January. However, CPI jumped back to 4.5% yoy. The data might reinforce officials' concern that inflation is not going away yet and could complicate the plan to add stimulus to revive growth, lowering the possibility of policy loosening. Other data released saw Japan household confidence improved to 40 in January. Looking ahead, UK production, trade balance, US jobless claims, wholesale inventories and Canada new housing price index will be featured later today.