Euro halts gains as EU Officials discuss Greek debt swap

Pound:
Sterling hit a two-week high against the dollar on Monday as tentative hopes for a Greek debt deal put broad pressure on the U.S. currency, although speculation about further quantitative easing by the central bank limited sterling gains. The pound lost ground against the euro, with the cross set to take direction from talks between Greece and private creditors on the terms of restructuring the country's debt. Sterling was last up 0.1 percent at $1.5588, having risen to a session peak of $1.5602, its highest level since Jan. 5. Traders cited steady demand from a UK clearer, although gains were capped by offers said to be above $1.5600. Fourth-quarter UK GDP data tomorrow is expected to show the economy contracted, a factor that is likely to undermine sterling.  Bank of England Governor Mervyn King is also due to speak this week while the minutes from the most recent BoE Monetary Policy Committee meeting on Wednesday are likely to reinforce expectations for further asset purchases.
Data 09.30: Public Sector Net Borrowing; 20.00: BOE Gov King Speaks.

Euro:
The euro halted an advance to a three-week high on signs European officials and Greek bondholders remained divided on a debt-swap deal to stem the region’s fiscal crisis. Luxembourg Prime Minister Jean-Claude Juncker said talks aimed at relieving Greece’s debt burden were “off track.” Demand for the dollar was limited before the Federal Reserve begins a two-day policy meeting, after which it will provide forecasts for its benchmark interest rate for the first time. The euro is currently trading around $1.3020 from $1.3013 in New York yesterday, when it reached $1.3053, the most since January 4. Euro-area consumer confidence gained ground in January, a report showed yesterday. An index of household sentiment rose to minus 20.6 from a revised minus 21.3 in December, the Brussels- based European Commission said in an initial estimate. Economists surveyed forecast a drop to minus 21.4.
Data 09.30: Industrial New Orders m/m.

Dollar:
Following the losses the US dollar took during the European trading session yesterday, investors will be eagerly watching for news out of the two-day Federal Reserve Policy Meeting scheduled to start today. The USD started off the week on a bearish note following an increase in risk due to apparent signs of a euro-zone economic recovery. Whether the greenback will maintain its downward trend for the rest of the week will largely be determined by the results of the Fed meeting. While the Federal Funds Rate is not expected to go up when the indicator is announced tomorrow, investors will be watching the meeting closely for clues as to when US interest rates will go up. Should the Fed decide to maintain its current policy of record low interest rates for the near future, traders will likely take it as a sign that the US economy still has a long way to go toward full recovery. Such an event may lead to further losses for the greenback.
No major data due today.

General:
•    Australia’s dollar declined from the highest level in 12 weeks on speculation a report tomorrow will show gains in consumer prices are slowing, providing scope for the nation’s central bank to cut interest rates.

 
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