Will the EU summit provide solutions? It's looking more doubtful

With wild volatility successfully wiping out both bull and bear short-term positioning overnight, Asia shrank into its shell and kept currencies in tight ranges ahead of the EU summit this weekend.
 
An early leak of the draft communiqué has perhaps reduced some of the surprise element, (though there are a lot of blanks/brackets to be filled in, especially numbers!) while down-playing of expectations of a comprehensive solution by both German and French officials (and the organising of a second summit next week) will reduce the “surprise” element early next week.
 
Data releases were second-tier with the U.K. Nationwide consumer confidence perhaps the most important. The index fell 3 points to 45 in September, a touch worse than forecasts, and was the fourth successive slide, coming within touching distance of February’s all-time low of 41. Consumers are still reluctant to spend though there is less conviction that the economic situation would deteriorate further in the next six months.
 
In the U.S. Senate, Republicans and Democrats rejected each other’s economic stimulus bills and thus stopped a piece of Barack Obama’s $447 bln jobs plan, underscoring the inability of politicians to grasp the nettle and get things done. Market reaction was a big zero.
 
It was a hectic, choppy 24 hours for the EUR as markets traded from headline to headline, rumour to rumour yesterday. We saw early strength as an EU source said the next tranche of Greek aid was not in doubt and details of EFSF guidelines were seen as a positive, but this soon changed as market chatter suggested Germany was considering delaying the EU summit. As it turns out, the summit is going ahead though German and French leaders have urged another meeting on October 26. Late in the session Greece passed its latest austerity package (though with a reduced majority) which was countered by S&P warning that it would likely downgrade the ratings of France, Spain, Italy, Ireland and Portugal if the EU slips into another recession. U.K. retail sales were firmer than expected though tempered somewhat by a downward revision to the previous month’s data and GBP basically remained sidelined at the whim of EUR moves.
 
In all the EUR volatility, U.S. data releases almost went unnoticed, though they were generally better than forecast. Weekly jobless claims were net flat with a 5k increase to last week’s data countered by a 6k drop to 403k this week. Leading indicators were unchanged from a month ago, up 0.2 percent, but the Philadelphia Fed index was a surprise with a strong rebound to +8.7 from -17.5 last (-9.4 expected). Existing home sales were the only blot on the landscape, with a larger m/m fall than expected (-3.0 percent) and breaking the recent run of good news from the housing sector.