"Markets are expecting little in the way of significant progress, although Chancellor Merkel indicated that a growth package is in the works with details to follow shortly. A plan for the European Stability Mechanism to buy government bonds of embattled countries has also been tabled but that remains a more distant possibility at this stage", they add. "Meanwhile, the Italian treasury auctioned five and ten-year bonds at the highest yields since December. Spanish yields also continued to climb".
"FX markets should continue to remain choppy as the European summit unfolds and as such we retain our bias for U.S. dollar and yen strength over the near term", they conclude.