The euro remained under a bit of pressure in Asian and early European trade drifting towards the 1.3050 level before finding some support from sovereign buyers. There is a reported 1 Billion option expiry at New York cut today at 14:00 GMT at the 1.3050 strike price which may box the pair into a tight range until that time.

Meanwhile at the EU summit European leaders continued to work on long range plans for further fiscal integration but made only modest progress on the issues. With respect to banking union the leaders decided to first establish a regulator with implementation to take place during the course of 2013. Therefore no banking union will occur until a regulator is in place leaving the region with a fractured banking sector at least until the start of 2014. Some analysts have argued that a banking union in the EZ is perhaps even more important than a fiscal union, so it will be interesting to see if this gradualist approach will be enough to satisfy the market.

As to the idea of further burden sharing and fiscal integration the leaders decided to push back the discussion to their next meeting in December. Clearly there remains serious disagreement within the EZ as to the extent of integration the members are willing to assume.

With respect to Greece and Spain EU leaders welcomed the progress on the former but did not make any decisions on either country, although they expect to reach a conclusion on Spanish bank recapitalization within a few weeks.

Overall the EU summit is producing little new policy initiatives so far, and that lack of action is being reflected in the market as the enthusiasm of euro longs has clearly diminished over the past few days with the pair failing to take out the 1.3150 barrier this week and now in danger of slipping back to the 1.3000 level as progress on the fiscal crisis in Europe remains slow.