Euro Edges Higher But Outlook Remains Negative.

The Euro edged higher against the US Dollar amidst worries about debt turmoil in Spain and Italy. Also ahead are elections in Greece which keeps the single currency under pressure.

Against the Japanese Yen, the Euro held firm close to overnight highs but the outlook remains negative as Italy prepares for a 4.5 billion Euro bond sale later today.

The Euro had been rising the past couple of days, ahead of crucial Greek elections this Sunday and following disappointing U.S. retail sales data which weighed on the Dollar.

Nevertheless, the Euro remains under strong pressure. A sharp rise in German bunds in the past few days has heightened concerns that Germany, the Euro Zone's largest economy, cannot itself bear the rising costs of the debt crisis should Italy need assistance. Signs are there that investors may be cutting exposure to the entire Euro area.

On Wednesday, Moody's declared a three-notch downgrade of Spain's ratings. Analysts expect that this may augment the recent stress in the European bond markets and most likely put the Italian bond auctions due today under even greater scrutiny.

Italy is today due to sell up to 4.5 billion Euros of three, seven and eight year bonds, and its borrowing costs are predicted to rise sharply.

The sale follows the yield on its one year notes having hit a six month high of 3.97% at a debt auction yesterday. The Italian government is seeking to convince investors that the country won't be the next to need a bailout.

Italy remains a concern as reforms undertaken by its unelected government have stalled and to date, there is no clear strategy having emerged in Europe to stop the broader debt crisis.