Merkel and German Finance Minister Wolfgang Schaeuble have expressed their confidence that the ESM will survive the constitutional test. Officials voiced greater concern over the details of the court’s ruling rather than the possibility of an outright rejection of the permanent bailout fund. While, in Greece, Samaras failed to secure an agreement from his two coalition partners on 11.5 billion euros in spending cuts required by the troika, the Commission, the ECB and the International Monetary Fund. The troika’s approval is required for the country to receive its next tranche of funds.
Spain is likely to seek assistance in the coming weeks, Der Spiegel reported, citing unidentified officials in the European Commission. The ECB’s plan foresees conditions on countries that want to participate in the bond operations. In the Netherlands, politicians were jostling for position as polls showed that the five parties that signed an austerity agreement under caretaker Prime Minister Mark Rutte won’t get enough backing for a majority. The Dutch Labor Party, which wants more time for the country to meet budget targets, has caught up with Rutte’s Liberal Party ahead of this week’s election, according to a poll taken by Ipsos Synovate
EUR/USD: The EUR/USD was trading slightly higher at 1.27636 at the time of writing ahead of the policy-setting Federal Open Market Committee starts a two-day meeting tomorrow, where investors are expecting additional easing to be announced at the FOMC meeting. Market sentiments and speculations will be driving the market on the European session as no major events are expected. The risk events for the pair will come in the American session, when the U.S will release its trade balance data. In the political front, Greek PM Antonis Samaras is set to visit ECB president Mario Draghi in Frankfurt, while Chinese PM Wen Jiabao will give a speech at World Economic Forum held in Tianjin, which could bring some headlines adding volatility. Greek Democratic Left leader Fotis Kouvelis, whose party is one of the three in the coalition government, said no decision had been made on spending cuts and that poorer citizens must be protected from austerity measures. The leaders of the three parties agreed to meet again tomorrow, two days before euro-area finance ministers gather in Cyprus for a briefing on Greek progress. Most importantly, investors will be monitoring the headlines out of Germany regarding Federal Constitutional Court ruling on the country’s participation in the European Stability Mechanism, which is due to release tomorrow. Investors should remain prudent and wait for some news to come on market to get visibility on the trend of the pair. The resistance level is at 1.28105 and the support level is at 1.27188.