Euro/dollar has kept to a very tight range over the past 24 hours, regaining some stability and recovering ground from its lows of $1.2668 seen in Asian trade on Sunday night. Sentiment, however, remains fragile ahead of this week’s Italian and Spanish debt auctions, as well as key meetings on the ongoing euro zone debt crisis. German Chancellor Angela Merkel meets the IMF’s Christine Lagarde today, and is scheduled to meet Italian PM Monti tomorrow. A Germany-France-Italy summit meeting will be held in Rome on January 20, with euro zone finance ministers due to meet a few days later ahead of an EU summit on January 30 to discuss potential treaty changes. Speaking yesterday after meeting French PM Sarkozy, Merkel said that negotiations on a fresh European treaty to reinforce budget discipline are making good progress and there is “a good chance” of reaching agreement by the end of
January.

Meanwhile, the two leaders pressed Greece and its bondholders to agree on a reduction of the country’s debt burden, warning that further Greek bailout loans are on hold until a deal is reached. Similar to its performance versus the dollar, the euro has stabilised versus sterling but again remains vulnerable on the downside. UK data released overnight showed December retail sales (BRC survey) ahead of expectations, though the Q4 BCC manufacturing survey was gloomy in tone. Meanwhile, the RICS house price survey showed prices falling at their slowest pace in three months. The Swiss franc hit a three month high versus the euro yesterday following the resignation of the Swiss National Bank’s chairman. However, the currency’s gains proved short-after the central bank said it would stand by its current forex policy regime and continue to defend the CHF floor versus the euro.