By | February 22 2010 8:15 AM

The optimism that drove stocks significantly higher in Asia has lost momentum.  Very strong Q4 growth data from Thailand and Taiwan overnight fuelled confidence with respect to the Asian recovery this year and underpinned a rally in risk.  This lifted EUR/USD, cable and led to a squeeze in long JPY positions in early Asian hours.   By contrast, European stock indices have shifted generally lower in a quiet, data free morning.   Price activity in EUR/USD has been choppy, but the bias has been lower in London; taking the EUR back below the USD1.3600 level.  Despite reassuring comments from Greek politicians on its budget, European investors are clearly still nervous that worse could be in store for the EUR.  Looking beyond the immediacy of Greece's current budget problems, the market is wary about the ability of EMU to sustain itself without strengthening fiscal ties.  Insofar as any effort to harmonise fiscal policies would question the sovereignty of the member nations this is a political no go area.   Greece's budget difficulties may eventually be softened by help from the EU.  However, this will not fix any of the structural fiscal problems of EMU which have been uncovered by the recession.   Planned strikes in Spain this week against pension reform will highlight the political difficulties of budget reform.  Reports that Greece may auction EUR5 bln of 10 yr bonds this week are yet unconfirmed.    The Greek-Bund 10 yr spread is this morning holding Friday's improved levels reflecting some optimism that buyers for the debt will be found.