The euro extended its recovery against the dollar on Wednesday despite very weak manufacturing data, while stocks markets were slightly lower as investors wait to see if there is progress in approving next tranche of aid for Greece and in addressing the U.S. fiscal cliff.
In the U.S., a weak retail sales reading didn't help to the matters while the main event of the day will be the release of the latest FOMC minutes, due for today at 19:00GMT.
Meanwhile amid a national strike, of Spain bailout request make rounds while Rehn spoke in a keenly anticipated speech to confirm that Spanish reforms and recovery was on track but measures will fall short for 2014.
"Overall we are broadly neutral on FX markets for the balance of the day, though we expect trading could be choppy and reactive to both European and U.S. headlines", says Nick Bennenbroek, Head of Currency Strategy, Wells Fargo Bank.
Euro's near-term picture improves
EUR/USD touched a daily high of 1.2755 before finding resistance and entering in a consolidation phase. However, at least at this point, headlines aren't shocking enough to propel a decisive move in the cross.
The near-term picture has improved as the pair consolidates above the 1.2700 level. However, failure to regain 1.2800 zone, previous range floor and 200-day SMA, would keep the downside vulnerable.
According to the TD Securities team, the small EUR gain runs counter to the negative rumblings on Greece, but the move seems more consolidative than anything. "A push above 1.2780/85 would be more constructive", they comment. "The bias appears to still be geared toward risk aversion (as indicated by equities in particular) for the time being".
Meanwhile, Karen Jones, expert at the German lender Commerzbank, expects rallies in the cross to be tagged as corrective against a backdrop of a wider bearish outlook. "We are more cautious today as we note the TD perfection setup on the daily chart and the divergence of the 240 minute RSI and we would allow for a near term rebound ahead of further losses", the analyst commented, adding that the downtrend would target the area around 1.2480.
Looking ahead, the Federal Open Market Committee will release the minutes of the latest meeting. Although market consensus does not expect major announcements, the statement has grown in importance and relevance given the mounting U.S. "fiscal cliff" and the end of "Operation Twist" by year-end.