Today the euro remains firm versus the dollar and sterling, trading in relatively tight ranges despite the announcement from ratings agency Standard & Poor’s that it is cutting Greece’s long term credit trading to selective default. Such a move was already expected and indeed factored in, though yesterday’s comments from EU Commission President Barroso that eurozone leaders will not decide whether to boost the lending power of bailout funds at this week’s summit meeting could weigh on sentiment. Instead, they will just concentrate on sorting out the finer details of the new Greece bailout package. Yesterday the German parliament overwhelmingly approved the package.

Ahead of tomorrow’s ECB LTRO markets are likely to have been cheered by yesterday’s eurozone M3 data for January, which suggested that the central bank’s generous liquidity measures are having some impact. The annual growth rate in M3 accelerated to 2.5% last month, compared to a 1.5% increase in December. This was much higher than market expectations of a 1.8% rise. In monthly terms, M3 grew 0.7% in January after three straight months of decline. The three-month moving average still remains well below the ECB’s “reference value” of 4.5%, which it considers to be consistent with its price-stability mandate, but the data were encouraging nonetheless.

Meanwhile, the dollar continues to slip against the yen following the recent easing of monetary policy in Japan. The dollar saw nine month highs yesterday and while currently off this level is expected to make further headway near term. The fall back in the yen is likely to be welcomed by many, given that its strength over recent times has weighed heavily on the country’s export sector.