As widely anticipated the European Central Bank held benchmark refi rate steady at 1 percent with President Mario Draghi reintegrating the need for accommodative policy. In his post decision press conference Draghi noted substantial downside risks to economic outlook for the euro area continue to exist and monetary policy stance remains, will remain accommodative. A concession to the dovish tone was the Central Banks view of December's long term refinancing operations designed to inject liquidity into the banking system which Draghi has labelled an effective policy measure.

Euro-zone Industrial production fell at an annual rate of 0.3 percent in November, falling short of the expected 0.2 percent growth. Industrial output also fell greater than expected in Italy which recorded a 4.1 percent contraction on year. German consumer prices rose at a yearly pace of 2.1 percent in December, in line with economists' expectations and unchanged from the previous estimate.

Solid demand for Italian and Spanish debt inspired Euro bids in European trade and momentum built over the course of the session with EURUSD recording highs of 1.2845. Market participants are convincingly net-short Euro's; in turn providing a platform for amplified strength should we even mild positivity out of the Euro-region. The Euro's outpaced most major counterparts overnight with the Greenback, Sterling and Yen among the biggest losers.

Across the Channel the Bank of England also held rates steady at 50bps with no change to quantitative easing measures currently at GBP275-billion.

The Australian dollar recorded intra-day highs of 103.7 US cents in European trade but quickly retraced gains coinciding with general weakness across U.S equities. In contrast to the recent theme of strong U.S economic feedback, retail sales data released overnight failed to meet investor expectations. Sales grew 0.1 percent in December falling short of 0.3 percent anticipated, while weekly jobless claims also climbed above expectations recording 399,000 new applicants from a previous and expected 375,000. Nevertheless, equities markets regained the lost ground over the course of the session providing natural support for risk assets including the Australian dollar, with price action once again supported above 103 US cents. We're seeing supportive behaviour around the 102.85 US cents region and we're anticipating downside to be contained around these levels in domestic trade.  At the time of writing the Aussie dollar is buying 103.4 US cents.