The euro was underpinned today by hopes a way would be found to push through a second bailout deal for Greece, though fresh signs of exposure to Europe's economic troubles among leading banks rekindled investor unease, sending shares lower.
US stock index futures pointed to the unresolved Greek deal weighing on Wall Street at the open, ahead of Senate testimony from Federal Reserve Chairman Ben Bernanke that may grab the spotlight at 3pm after last week's strong jobs data.
Greece's prime minister and leaders of its main political parties are talking today about new austerity measures demanded by the EU in return for another bailout. The deal needs to be approved by February 15th if the money is to be available in time to meet a March 20th bond redemption.
"I think we are going to hear some news of an agreement. It may not be today, it may not be tomorrow, but the February 15th deadline is absolutely crucial," said Peter Westaway, chief economist, Europe, for Vanguard Asset Management.
The euro dipped by just 0.1 per cent to $1.3120, after initially gaining a similar amount, tracking below a six-week high of $1.3235 hit at the end of January.
"The euro is performing relatively well given the deadlines for Greece keep being extended. This suggests there's more risk of a move to the topside should a deal be agreed," said Adrian Schmidt, currency strategist at Lloyds Banking Group.
Bets by foreign exchange traders that the single currency will fall have been running at record levels according to data from the US Commodity Futures Trading Commission, although the positions were trimmed slightly in the latest week.
Figures on German industrial output, which surprised analysts by showing the biggest fall in December since the start of 2009, did not alter the view that the region's biggest economy would escape a recession in the first quarter.
Berlin's economy ministry said industry orders, which rose more than forecast in December, in fact signalled that a phase of domestic economic weakness was coming to an end.
The dollar was broadly firmer against a basket of currencies gaining about 0.1 per cent to 79.14 on its trade weighted index.
European stocks, which have risen sharply on a flood of cash available to investors at the start of the new year, fell back as a weak earnings update from Swiss bank UBS signalled the debt crisis will wreak further damage on the banking sector.
The FTSEurofirst 300 index of top European shares was down 0.4 per cent at 1,071.19 points after opening unchanged.
Global stock markets were flat on the day having gained more than 8 per cent already in 2012.
Reuters
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