The euro recovered some of the losses incurred with the start of the session this week, after the Spanish Treasury was able to sell bonds successfully with yields falling sharply from records, which added some positivity and supported markets to rebound slightly, yet volatility is highly possible ahead of the Federal Open Market Committee (FOMC) rate decision expected later today.

Spain sold 4.94 billion euros of 12-month bonds, producing yields of 4.050% less than the previous yields of 5.022% at the November auction. Spain sold bonds more than the quantity targeted, where demand was 3.14 times compared with 2.13 times an auction earlier, and fortunately yields dropped sharply which led Spain to take advantage and issue more bonds on less borrowing cost.

Spain also sold 18-month notes at 4.226%, down from the previous of 5.159% seen in November, which in result eased market tension and rising jitters, where investors are closely watching yields for indications over the next victim of the debt crisis, with Italy now is the most probable suspect.

The euro rebounded to the upside against the U.S. dollar after the news, yet the pair is fluctuating heavily ahead of the critical FOMC rate decision, where speculation in the market indicate that the Committee could have opted to leave rates unchanged at virtually zero (0.0%-0.25%) in order to support the existed pace of recovery and spur growth further.

The EUR/USD pair opened the session today at $1.3185, and recorded the highest at $1.3235 and the lowest at $1.3159, and trades now around 1.3200.

Moreover, eyes will be focused on the retail sales index, where better than expected sales could support markets to rebound further. The developments in U.S. are encouraging, where U.S. could now lead the pace of recovery globally, where this improvement seen in unemployment, growth and spending levels could negate the need for another round of quantitative easing.

The U.S. dollar index (USDIX) opened the session today in Asia at 79.53, and recorded the highest at 79.62 and the lowest at 79.29, and is currently trading around 79.45.

The sterling pound also gained slightly against the U.S. dollar, where after inflation eased to 4.8% from 5.0%, we expect policy makers to add more stimuli with the start of next year in order to support growth and prevent the economy from falling behind and going through stagflation, which added strength to the pound over short-term basis, yet we should pay attention that over longer-term basis more stimuli could weaken the currency.

The GBP/USD pair started the day at $1.5581 and set a high of $1.5628 and a low of $1.5565, and is currently hovering around 1.5582.