Asian session: The euro was 0.5 percent from a 16- month low against the dollar

The euro was 0.5 percent from a 16- month low against the dollar on speculation European Central Bank policy makers won’t take steps today to support growth even as reports signal the euro-area economy is struggling.

The 17-nation currency held a drop from yesterday versus the yen before figures estimated to show European output shrank in November. Demand for the euro was limited before Spain and Italy sell debt today, amid concern the nations will struggle to meet funding needs. Spain will auction as much as 5 billion euros ($6.4 billion) of bonds due 2015 and 2016 today, while Italy is scheduled to sell 12 billion euros of bills. The ECB will probably keep its key interest rate at 1 percent at a policy meeting today, the median estimate of economists surveyed by Bloomberg News showed.

New Zealand’s dollar touched a two- month high against the greenback as a report showed China’s inflation cooled for the fifth straight month in December, increasing speculation the Asian nation will provide more monetary stimulus.

The so-called kiwi also rose to its strongest level since November versus the yen before data that may show U.S. retail sales grew, supporting demand for riskier assets.  China’s consumer prices rose 4.1 percent from a year earlier, the National Bureau of Statistics said in Beijing today. That compares with the median estimate of 4 percent in a Bloomberg News survey and 4.2 percent in November.

The People’s Bank of China in November cut the amount of cash that lenders need to set aside as reserves, the first reduction since 2008. China is Australia’s biggest trading partner and New Zealand’s second-largest export market.

Sales at U.S. retailers probably climbed 0.3 percent in December, following a 0.2 percent gain in November, according to the median forecast in a Bloomberg survey of economists before the Commerce Department issues the figure today.

EUR/USD: on Asian session the pair traded in range $1.2700-$1.2730.

GBP/USD: on Asian session the pair traded in range $1.5305-$1.5330.

USD/JPY: on Asian session the pair traded in range Y76.80-Y76.90.

European data starts at 0630GMT with France HICP, which is followed by German final HICP at 0700GMT and then France balance of

payments and central government deficit data at 0745GMT. At 0900GMT, ECB Governing Council member Jens Weidmann, German Finance Minister Wolfgang Schaeuble and German Chancellor Angela Merkel all attend a New Year's reception of the German President, in Berlin. EMU data at includes  industrial output at 1000GMT and the OECD leading indicator at 1100GMT. UK data at 0930GMT sees the Index of Production as well as Industrial Production and Manufacturing Output data. Manufacturing output plunged on the month in October, and unless there is a sharp rebound in November and December the sector will end up making a negative contribution to Q4 GDP. US data starts at 1330GMT with both initial jobless benefit claims and retail sales data. At 1500GMT, US business inventories are expected to rise 0.5% in November after the 0.8% increase in October. Factory inventories were already reported up 0.5%. Late US data sees the 2130GMT release of Money Supply.