A primary driver of sentiment overnight remained with the Greek PSI talks which have thus far failed to produce any closure for market participants. The bottom line is Greece has near-term maturing debt with maturing debt of 14 billion-euro due by March 2 - without this agreement Greece will have little chance of avoiding a hard-default scenario. Greek finance minister Evangelos Venizelos has said We have the green light from the Eurogroup to close the deal with the private sector in the next few days. Without a concrete deal in a long lasting stalemate situation will remain a stumbling block for markets.

Nevertheless, German manufacturing and services sectors outpaced expectations in January with manufacturing PMI returning to growth to record an index level of 50.9, while the services sector similarly came in better-than-anticipated at 54.5. In keeping with the recent theme of solid demand for European debt, Spain sold debt at auction with a 3-6 month maturities fetching a decidedly better rate than Decembers auction.

The Euro bounced off $US1.2952 lows and once again made a break above $US1.30 with moderate optimism shinning through despite an otherwise cautious demeanour. The Aussie dollar has recovered from overnight lows of 104.27 US cents but remains capped under the natural selling pressures around 105 US cents. Considering we have see the local unit cross this region numerous times it's hardly a major milestone to break with some support in local trade. Local event risk today includes 4Q consumer price data at 11.30am which is expected to show inflation moderate to a yearly pace of 3.3 percent from a previous 3.5 percent. The RBA's preferred measure of inflation the 'trimmed mean' which strips out prices on the top and bottom end of the price scale are expected to 2.4 percent growth on year, from previous 2.3 percent. In essence, the rate of inflation sits neatly between the RBA's preferred target between 2 - 3 percent and is unlikely to suggest an immediate need for the central bank to adjust policy when they next meet in February. Keeping in mind today's data presents considerable event risk for the local unit with any deviation from estimates to sway price action. We expect any downside to slow around the 104 US cent level with 103.8 clearly showing previous technical points of both support and resistance to contain weakness in domestic trade before we're once again at the mercy of Europe and the United States with Greek PSI talks and FOMC to provide the top tier event risk.