All eyes will be back on the Eurozone today as the leaders of the European Union hold their second summit in the space of a week in search of a comprehensive solution to the Eurozone debt crisis. However, pre-summit nerves are showing as Tuesday's headline flow was hardly reassuring for those in search of a positive outcome. German lawmakers initially disputed the inclusion of language in the final draft calling for more secondary bond purchases by the ECB. Shortly afterwards, newswires reported that Wednesday's meeting of EU Finance Ministers had been unexpectedly cancelled, which triggered a brief selloff of the euro. The announcement came without any explanation, and investors naturally assumed the worst. However, the more important summits of EU and Eurozone leaders will still go ahead today as planned.
The Summit is scheduled to start at 1600 GMT, where the entire complement of 27 EU Leaders are due to attend for a short meeting. A second summit of only the leaders of the 17 Eurozone countries then convenes at 1715 GMT. It is expected a formal communiqué to be released eventually, plus a possible press conference, but no set times have been given.
In Asia, The Bank of Japan's two-day meeting is due to begin on Wednesday, with an announcement expected around 0400GMT on Thursday. Japanese Finance Minister Azumi said he had told G20 meeting Japan sees USDJPY level of 76/77 as appropriate, and stressed that he didn't think the G20 communiqué’s wording on FX prevented Japan from intervening in markets. He also said Japan was ready to buy more EFSF bonds if Europe comes up with a credible solution.
Finally, The Bank of Canada kept the policy rate unchanged at 1.0%, as had been widely expected. However, significantly, the bank dropped its explicit tightening bias and has now assumed a neutral policy stance. USDCAD climbed 40 pips on the announcement and got a second boost minutes later when it emerged that Wednesday's meeting of EU Finance Ministers had been unexpectedly cancelled. S&P affirmed Canada's long-term sovereign rating at AAA, outlook stable.
