Of course it comes as no surprise that in a constantly surprising FX market that in week leaden with economic news, currencies may ignore all of the data as geo-political tensions preoccupy  dealing desks around the world. The news of the night comes from Iran where the country's chief nuclear talks negotiator stated, "we consider any referral or report of Iran to the Security Council as the end of diplomacy."  Mr. Ali larijani response comes after the five permanent members of the UN security council issued a joint communiqué saying that the Ministers "have agreed that this week's extraordinary IAEA (International Atomic Energy Agency) Board meeting should report to the Security Council its decision on the steps required of Iran." The standoff is coming to a head despite the fact that no party stands to benefit from escalation of tensions.  Any serious conflict could freeze global growth in a heartbeat by sending oil prices into the stratosphere, if Iran decides to retaliate in the Strait of Hirmuz.  The focus will now turn to Thursday's IAEA meeting although no formal action will be taken until IAEA board of governors meeting in March. The political news may overshadow the slew of economic data this week including the FOMC meeting later today. The Swissie - traditional haven for safe capital - has firmed on the crosses in overnight trading, but only marginally so as traders appear to take a wait and see attitude for now.

Meanwhile the eco news from Japan was generally strong while the Eurozone data was decidedly mixed. In Japan Household Spending rose by 3.5% on year over year basis exceeding expectations of a 2.4% increase. On a monthly basis this was the second time in 3 months that the number showed an improvement suggesting that Japanese consumers are beginning to contribute to the country's economic recovery. Most analysts believe that BOJ will not change its ultra accommodative monetary policy until it is certain that the Japanese consumption has turned positive therefore today's numbers were critical to the yen bullish thesis.

On the European side however, the news offered few cheers for euro longs. German unemployment  rose 69K against expectations of -20K decline and the unemployment rate rose to 11.3% from 11.2% projected, but the data was skewed by seasonal factors and one time adjustments ahead of the change in the law and was therefore mostly ignored by the market. More ominously, the EZ Business Climate indicator printed at .34 vs. 41 consensus and German Retail sales declined -1.8% vs. projection of a 0.9% rise. The data indicates that high oil prices continue to weigh on both the producers and consumers in the Euro-zone and the market will need to see further evidence of strength before being assured of the recovery in the region.

Boris Schlossberg is a Senior Currency Strategist at FXCM.