EURO remained firm against the dollar (1.3426) in Wednesday’s morning trade in Asia as investors trimmed their holding of positions considering whether to bet on a further decline in the common currency ahead of crucial EU-summit on Thursday and Wednesday and European Central Bank (ECB) meeting on Thursday.

Market participants are closely watching any developments and new moves with eyes mainly on the compromise package worked out between Merkel and Sarkozy indicating a rewriting of the European Treaty. The rating agency Standard and Poor shocked markets yesterday with news that it intends to downgrade all members of the EURO-zone.

While most concentration so far has been on Germany and France, Premier Cameron yesterday stated that he shall veto any revision of the EU-treaty not in accordance with British interest. This tells that the indicated Merkel/Sarkozy proposal by far is a foregone conclusion. Any transfer of power and authority to Brussels shall most likely be met with fierce resistance from more nationalistic member states.

Australian GDP grew 1,0 % from previous quarter and climbed 2,5 % from a year earlier. 0,8 was expected. The better than expected figures supported risk sentiment and benefited higher yield currencies as the Euro.

A senior dealer at Barclays Bank in Tokyo claimed many investors seem to cover Euro/USD short positions and that the ground appears to be firm in the 1,33 segment. In short term there is an upward bias versus dollar. Euro/USD will likely continue to be volatile driven by any headlines prior to the EU-summit.

Oil prices have stabilized over the last 24 hours. Trend towards a stronger Yen continues; USD/JPY at 77,72. Gold is trading at 1729 up from yesterday’s low at 1703.