GBP/EUR 1.3464 (0.7419)
Yesterday saw the dollar give back some of the ground it made up on the back of Friday’s robust jobs data. The dollar index, an indication of the greenback’s performance against a basket of major currencies, slipped 0.3 percent to 94.459, having gained over 1 percent on Friday after the U.S. employment figures. Likewise the euro has been slow out of the blocks this week as the situation in Greece is starting to weigh on the single region currency, with Greece’s new Prime Minister Alexis Tsipras remaining resolute on the current bailout terms. One man’s misery is another’s man’s gain and the pound has been quick to turn the screw, rallying more than 2% against the euro in the last week and nearing the 7 year highs reached at the end of January.
In the euro area this week, we see Greece continuing to embark on its battle over the county’s staggering debt. Greece is currently Europe’s most indebted state and is currently in a standoff with its creditors over the conditions attached to its €240 bn bailout program. The Greeks are currently trying to renegotiate some of the austerity measures that were imposed on the previous government. Last week we saw Greece’s Finance Minister Yanis Varoufakis struggle to make any sort of headway on these renegotiations, with the ECB restricting access to its direct liquidity lines. While in Germany things didn’t fare any better as Varoufakis light heartily put it “we didn’t even agree to disagree”.
Varoufakis will be in Brussels tomorrow where he is due to present a proposal at a meeting of eurozone finance ministers in Brussels. If the parties here fail to agree, then Greece may be forced to look at their Plan B which Defence Minister Panos Kammenos spoke of. Greece’s apparent Plan B is to get funding from another source, he told Greek television, “It could the United States at best, it could be Russia, it could be China or other countries”. While we know that Russia has recently come out in support of assisting Greece, such measures might not be welcomed by its current creditors. We will continue to watch how this situation unfolds closely.
Earlier this morning we had some positive news for the Eurozone as both Italian and French industrial production beat expectation and more importantly increased from the previous months figure. We will have to wait till the end of the week however before we have the heavier weighing data with German and Eurozone GDP figures topping the bill.
In the UK we have Industrial and Manufacturing data crossing the wires this morning but the big news of the week will be Thursday’s inflation report and the content of Carney’s letter to the chancellor which he wrote last month as a result of the inflation figure dropping below 1 %. The letter will outline what the BoE’s plan of action is to combat this falling inflation figure. Traders will be observing this release closely as the dropping inflation figure has led many to push back the rate hikes here, any change in rhetoric or hawkish statements may see the pound continue to strengthen.