The euro edged away from a fresh 16-month low against the US dollar this morning, but further declines are likely as worries over eurozone debt keep investors bearish on the single currency.

Supporting the embattled currency were comments from the IMF's managing director Christine Lagarde, who said that Europe may avoid a recession this year and that there were reasons to be more upbeat about prospects for the region. However comments from Angela Merkel and Nicolas Sarkozy, during a press conference after their first meeting of the year, failed to provide a further euro lift. The two discussed ways to boost growth and said that talks between EU leaders for fiscal coordination within the currency block were progressing ‘well’, and that the treaty should be signed by 1 March. Separately, this morning Germany issued debt with a negative yield for the first time ever, meaning that investors would pay Berlin for the privilege of lending it money.

The €4 billion auction of six-month bills drew a negative yield of 0.0122%, reiterating Germany’s safe-haven status amid the eurozone debt crisis. Focus this week will also fall on Spain and Italy in the run-up to their first bond auctions of the year, with little sign that investors have started 2012 with improved appetite for the eurozone's riskier assets.