The Greek Debt Management Agency has announced a forthcoming 7 year bond sale, to be launched and priced in the near future.  The Greek government is probably hoping to tap into the positive reaction that followed last week's announcement from the EU that a mechanism was in place to support EMU members suffering severe finance difficulties.  That said an announcement from the Debt Agency is not a surprise since the government is under pressure to issue an estimated EUR 10 bn this spring to enable it to rollover maturing debt.   Crucially the Greek government needs to rein in the cost of borrowing if it is to have any chance of fulfilling its pledge to reduce its budget deficit to 3% of GDP by the end of 2012.  This morning the 10 yr Greek-Bund spread has widened a touch suggesting that investors will continue to demand an expensive premium to hold Greek debt.  This suggests that even if this forthcoming debt sale is met with strong demand (like the recent 10 yr sale), the financing problems of the Greek government will not be over and a decision to resort to cheaper IMF financing could still be an attractive alternative for Greece later in the year.  The Greek bond sale will be an important hurdle for the EUR, but it is unlikely to prove to be the last suggesting that the present move higher in EUR/USD is likely to prove to be temporary.  

The better mood concerning EMU has lifted risk appetite this morning.  Adding to the positive tone was better than expected Eurozone business confidence data.  The JPY, however, has been reluctant to extend its softer tone into the European morning.  USD/JPY has held within its recent range close to the JPY90.50 area; the upside in EUR/JPY stumbled at the 125.25 technical resistance area.  The performance of the US treasury market is set to remain a dominating influence on USD/JPY this week.  Expectations for a positive US payroll report on Friday are likely already well priced in suggesting the USD/JPY longs may be vulnerable to a disappointment on payrolls and potentially to further signs of Japanese economic improvement in this week's Tankan survey.  This morning's Japanese Feb retail sales data at +4.2% y/y were far stronger than expected and provided further evidence that the Japanese economic recovery is firmly established.   

Cable briefly held above the USD1.500 level this morning.  UK data was limited to the softer than expected Feb mortgage approvals data and largely as expected consumer credit data.  The political outlook remains largely unchanged with opinion polls still pointing to a hung parliament after the general election suggesting that the outlook for sterling could remain clouded by growth and deficit concerns for some time.  S&P this morning reaffirmed its negative outlook on the UK's sovereign debt rating.   

AUD/USD has edged higher to 0.9145 this morning supported by hawkish comments from the RBA's Stevens.  USD/CAD dipped to an intraday low at 1.0202.  

This afternoon US personal income, spending data are due.  Treasury Secretary Giethner is due to speak as is the BoE's Dale.  
Jane Foley