The euro is holding on modest gains seen versus the dollar and yen overnight, with optimism that Europe could be finally moving towards comprehensive solutions to its debt crisis leading to a round of short covering. Traders are now focusing on a two day meeting of European finance ministers, which starts later today, to see if the group will provide any further details on plans to beef up the fire power of the regions bailout fund, the EFSF. At summit meetings in late October it was decided to leverage the €440 billion fund up to around €1 trillion but there has been little detail on this since then. Markets will also be watching for any further clues in terms of plans to move towards greater fiscal union, including talk of measures to curb excessive debt by making budget discipline legally binding. Many see the introduction of such measures as necessary before the ECB will even contemplate taking more aggressive action in debt markets. With all of this going on, fear of being caught short the market could provide support for the euro over the coming 24/48 hours but downside risks remain.

In other news overnight, Fitch affirmed the US’s AAA rating but did lower its outlook to negative, while there were unconfirmed reports that S&P may place France’s AAA rating on negative outlook within 10 days. Sterling has recovered from recent lows versus the dollar in line with some improvement in risk appetite, though comments from the BoE indicating that further QE is a possibility limited upside momentum. Amid fears that fiscal tightening will help kill off hopes of recovery in the UK economy, Chancellor of the Exchequer George Osborne’s delivers his budget statement later today. According to an opinion poll, the majority of UK voters want the government to ease up on its austerity program in order to boost growth.