Mid-Day Report: Euro Remains Weak as EU Leaders Called for Second Emergency Meeting on Greece …

The single currency extended intra-day decline to as low as 1.4015 in part due to rising concerns over eurozone debt crisis when Europe leaders called for another emergency meeting this Thursday to discuss second bailout package for Greece, investors are still not convinced that the EU officials are able to resolve the debt problem in the near future. Both Italian and Spanish 10-year bond yields rallied on risk of debt crisis spreading across Europe from Portugal and Greece to Italy and Spain. Having said that, euro found decent demand from Middle East names above 1.4000 and has recovered in New York morning.

Market will now shift focus on the result of this emergency meeting, called by German Chancellor Angela Merkel on Sunday to be held on Thursday in Brussels to discuss the financial stability of the region and for private investors to make a major contribution to bailing out Greece.

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Fed Mulls Options for Next Week’s Meeting

Next week, the Open Market Committee (OMC) of the Federal Reserve Bank will hold its monthly meeting. Even without checking futures prices, it’s obvious that the probability of an interest rate hike is nil. [In fact, the odds of a rate hike in November have already converged to 0%]. Why, then, are investors keenly awaiting the outcome of the meeting?

In a nutshell, they will be watching for two things. The first is any changes in the statement released at the close of the meeting. According to James Bullard, President of the St. Louis Fed, “If any new ‘negative shocks’ roiled the economy, the Fed should alter its position that interest rates would remain exceptionally low for ‘an extended period.’ ” If the OMC determines that the prospects for continued economic recovery are good, and/or the inflation hawks get their way, we could see subtle – but meaningful – changes to statement.

More importantly, the Fed must make a decision regarding the other tools in its monetary arsenal. Of immediate conc

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