Major Currencies Flat Ahead of ECB Meeting

The dollar is paring back some of its recent losses ahead of European Central Bank policy meeting. The EuroStoxx 600 is currently up 0.25%, with bank shares up 0.8%. S&P 500 futures are essentially flat.

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The euro is marginally higher, up 0.09%, after falling to a two-day low of 1.321. Sterling also edged higher, currently trading at 1.585, after another set of encouraging UK economic release. The Bank of England, as expected, extended QE by another 50 billion pounds. The Australian dollar was stable around 1.080 after hitting a low in the Asian session of 1.074. The New Zealand dollar is among the top performers in the G10 in spite of a softer fourth-quarter employment print. Elsewhere, during the Asian session China CPI accelerated to 4.5% year over year, but numbers may have been exacerbated by the Lunar New Year and the breakdown revealed that price pressure were still easing. The MSCI Asia Pacific index was close to flat, up 0.06%, after trimming earlier session losses.Follow TheStreet on Twitter and become a fan on Facebook.The eurozone finance ministers group meeting tonight at 6 p.m. Brussels time had raised hopes a deal for Greece was close. However, after meeting with Greek coalition members last night, Prime Minister Papademos has yet to close the deal, with press reports that pensions remain a key sticking point. Media reports suggest that as a result, the Troika will give Greece time to come up with 300 million euro more in savings. Reports of where the deadline falls differ, but given the legal and technical hurdles to overcome in order for Greece to meet its March bond payments, we do not think it can be extended by more than a few days. Draft documents suggest Greece has capitulated on the key issues of deeper cuts in minimum wage and additional reduction of civil service workers. The ECB also meets today, and while no change in policy is expected, markets will be watching the press conference afterward for any clues on future policy. Technical studies suggest potential for a move up to 1.3435 for EUR/USD, but believe much will depend on the tone during the press conference.

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On the data front, UK December production expanded 0.5% in December, beating market expectations. The improvement was driven by a 1% rebound in manufacturing production, which also came in better than expected. However, the Office for National Statistics revised fourth-quarter industrial production down by 1.4%, indicating a slightly larger decline than initially assumed. The ONS nevertheless said this revision would only have a marginal impact on fourth-quarter GDP, with industrial production only accounting for about 15% of GDP.

In China, Inflation exceeded expectations by a significant margin, rising by 4.5% year over year. Much of it can be explained by food inflation due to the Chinese New Year (up 10%). But that's unlikely to be the whole story, strong domestic demand surely played a role as well.

The Indonesian BI surprised markets with a 25 basis point cut to 5.75%. In its official statement the bank downplayed the impact of the energy price increases expected for later in the year and played up the risk to global growth. The bank sounded more confident about rupiah, which is now seen as "quite stable although slightly depreciated."

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