FX Markets continue to lack conviction and suffer from frivolous risk on / off sentiment (unlike equities and commodities, which have taken a clear bullish tone). The EUR and GBP's rally was halted dead in their tracks after the wires cited Greek officials (some reports named other anonymous) stating that he was not hopeful a solid aid proposal would be reached at the March 25-26th EU summit and was prepared to go to the IMF. To make matters worse, the source said that the bad feelings between Greece and Germany had increased, making negotiations difficult. Greek Deputy PM Sachinidis said later lack of support for Greece by EU leaders would have significant consequences for the EUR. These words clearly provided a reality check for the markets that the situation in Greece is far from being resolved (despite continued EU bailout grandstanding). Elsewhere, EU Commission President Barroso said the design of a bailout mechanism for Greece is being developed. And in response to comments from German Finance Minister Schaeuble and Chancellor Merkel, that a member state could be forced out, Greek Prime Minister Papandreou adamantly stated that there was no chance Greece would leave the Eurozone. While IMF has a wealth of experience and expertise, the stigma and unanswered questions would clear be a EUR negative. How quickly the optimism around comments from Brussels earlier in the week has worn off. As we have stated in countless reports, we don't believe the EU will actually EVER put forward aid and until we have some sort of resolution (one way or another) the EUR will continue to be sold on rallies. SNB Policy Board Member Danthine will hold his first major policy speech as a newly-appointed member of the SNB board from Zurich today. Given the price action in the EURCHF, markets will be intently listing for any clues as the SNB forward intentions. EURCHF has been rapidly dropping, pushing below 1.4600 and now 1.4500 without a peep from the normally vocal Swiss central bankers. The highlight of the US trading session will be initial jobless claims which are expected to fall to 455k vs. 462k prior reading and CPI rising to 0.1% m/m from -0.1% prior. After Tuesday's less than hawkish FOMC meeting any signs of US economic progress and increasing price pressure should be USD positive.
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