1. Spanish and Italian Auctions Successful, Euro Extends Rally

Today the European markets were focused on debt auctions from Spain and Italy. Spain managed to sell €3 billion of bonds, paying a yield that was close to 4.590%. That was higher than in previous auctions but a level that was below that in the secondary market and left investor feeling more optimistic. Italy's auction was also successful.

The news, in addition to what we reported yesterday in regards to developments around extending the European Financial Stability Facility gave the Euro a lift in today's session. Even if Portugal may have to be forced to seek a bailout, if there is enough in the EFSF to cover a possible rescue of Spain then markets can be more reassured.

2. Swiss Franc Pressured by Growth Outlook

Overnight we had the Swiss National Bank Vice-Chairman Thomas Jordan say that the country's economic growth will be lower than anticipated in 2011, on the back of a stronger domestic currency. The Franc has come off record highs against the Euro and US Dollar. Jordan said the economy will grow 1.5% in 2011. Tomorrow, government officials and business leaders meet to discuss the sky-high franc. We'll see if we hear talk of intervention come out of the meeting.

3. GBP Stronger on Manufacturing Results

With the US Dollar weaker vs the Euro, as optimism there grows, Sterling rallied against the greenback as well. While the Bank of England Rate decision did not hold much in terms of surprises, we are seeing a shift in expectations around the Bank of England and when they may hike rates next. Some think it could be as early as this June, as persistently high inflation has taken the BOE out of the monetary stimulus game.

Manufacturing data overnight showed output rising 0.6% in November, a bit stronger than expectations, which helped the GBP/USD to hold its gains.