Greece agrees two year extension to reach debt targets as fiscal cliff still looms
13/Nov/2012 • Currency Updates•
It was a quiet day for news out of the UK yesterday as the market mulled over the BOE keeping QE and interest on hold last Thursday. However, an OECD report released yesterday was fairly bullish on the prospects for the UK economy, suggesting growth will pick up in the New Year, with their leading indicator rising a notch. Today we have the CPI inflation figures being released which will be closely watched in light of the next MPC meeting and we also have the less important PPI and RPI figures.
The single currency traded near a two month low against the Greenback yesterday as markets continued to worry over the continued issues with Greece’s bailout programme. Any moves in the pair where restricted by thinner coverage due to the Veterans Day holidays. Despite Greek politicians agreeing new terms on an austere 2013 budget there still remain fears that they have not done enough to trigger the next round of bailout funds required to pay off their debts. The Greeks have agreed a two year extension on its debt designed to give the beleaguered sovereign time to get its house in order, however there are still tough deadlines to be met to trigger the rest of its aid package.
Elsewhere in Europe Merkel was singing the praises of Portugal as a model of how to implement austerity and make the changes required to reduce deficits and get back on the path to economic growth.
The Dollar continues to tread water as jitters over the pending fiscal cliff continue to worry investors. On the one hand the worries have seen the dollar strengthen from safe haven flows, however the market will be looking for answers from politicians in the medium term on how they will change policy and we could see this lead to dollar weakness. Reports today are suggesting that the US is set to become the biggest global producer of oil and natural gas by 2020 and self-sufficient by 2035 since due to a recent resurgence in onshore production. If this situation transpires then it will have a big impact on the Greenback and its relationship with global oil prices as the US currently imports 20% of its energy needs.