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Asian Session – Euro steadies after key events; US dollar awaits Fed

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The euro stabilized at a relatively higher level against the dollar, on optimism that the incoming anti-bailout government in Greece will eventually strike a deal with its creditors and scenarios such as a Greek exit from the Eurozone (so-called “Grexit”) will be avoided.  The euro was trading near its highs for the session just below 1.1250, having hit a low of 1.1096 right after the Greek election results were announced.  The new Greek Premier would announce his cabinet today and the focus of everyone will be how the negotiations with the Troika will proceed.

Risk appetite remained positive as optimism lingered following the ECB’s larger-than-expected QE package.

The pound was also trading just below the 1.51 level against the dollar, as it awaited the fourth quarter GDP figures.  The UK economy grew at a 2.8% year-on-year pace, according to a Reuters’ economists poll.

Markets were also expecting the outcome of the FOMC meeting tomorrow as the 2-day meeting begins today.  US interest rates are expected to head higher during the fourth quarter, according to futures’ markets.  Trading in the US is slower-than-usual as a huge snow blizzard hit the Northeastern United States.  In a busy day for economic data watchers, US durable goods orders for December, S&P Case-Shiller home prices, Markit Services PMI and New Home Sales for December are all coming out in the United States.

Finally the Russian Rouble fell sharply against the US dollar following the downgrade of Russian debt to junk status by Standard & Poor’s.  The agency cited decreasing economic growth prospects and limited monetary policy flexibility to deal with the downturn.  A recent intensification of the conflict in Ukraine has also increased the focus on geopolitical risk recently.

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