The big day for Europe is here, as ECB will announce its decision regarding the monetary policy. The euro is trading within tight ranges since early morning against its major counterparts and although it is widely awaited that rates will remain unchanged, investors are anticipating Trichet's press conference which may give markets a glimpse of the banks future plans. The latest European data suggest that recovery is a reality in Germany and France and other European countries are getting ready to exit their recessions. However, by any means that does not imply that the bank will start rising their interest rates, as economy is not out of the woods just yet.

The EUR/USD is trading on the upside since early morning and it is clear that traders are positioning for a positive Trichet later today. The pair needs to take out 1.4330 and then 1.4380 before further upside occurs. As long as 1.4230 holds for now, if words by ECB are what traders want to hear in terms of future interest rate hikes, the euro may rise in the coming days.

The GBP/USD found a temporary bottom at 1.6130 and has bounced significantly since then towards 1.6350. Next important level to watch is 1.64 as it may be met with heavy resistance. If the dollar weakens against the euro later today, the pair may continue to rise towards 1.4450. The economic data out of UK today were better than expected and with a little help from the euro; we may see big upside moves in the coming days.

The economic calendar has a few important events today, with ECB rate decision the most crucial one for the currency direction. Also we have ISM non manufacturing data today which once again is expected to print a better number, giving more reasons to market participants to believe that the worse may be over for now.  The latest economic data out of US have been showing signs of improvement and the US government officials have played their part in reassuring everyone that recession will seize to exist sooner rather than later. However, all sectors of the economy are not showing signs of recovery and the most crucial event of the week, tomorrow's nonfarm payrolls, will show us what is what. The ADP report yesterday for the payrolls showed a worse number than forecasts  and this although not completely accurate, nevertheless is showing that maybe we should not run before we walk and wait until further evidence surfaces about the economic stability in US economy.

For now, the currencies are moving sideways and the trading action is muted, as important events are following in the coming hours. Don't forget that G20 is also awaited by markets this weekend and it will be interesting to see what the comments of world officials about the economic recovery will be...