Greece prepares economic reforms to keep bailout hopes alive

Enrique Díaz-Álvarez24/Feb/2015Currency Updates

GBP

A very strong day for Sterling saw the currency rise by 0.5% to within touching distance of its strongest position against the greenback since 2nd January and marginally shy of a seven year high on the Euro.

Retail sales in the UK slowed unexpectedly in February compared to this time last year. The Confederation of British Industry’s distributive trade survey dipped this month after six months of buoyant sales, with the index falling to just +1. This marked its lowest reading since as far back as November 2013 and was the steepest monthly fall since 2010. Strong sales volumes in cultural goods and chemists were offset by dismal figures among grocers and department stores according to the report.

An examination of the inflation report at the House of Commons at 10am will be the focus of markets today in the UK. One eye among investors will also shift to Thursday, with UK National Statistics releasing its revised growth data for Q4.

EUR

Monday was another day of slight declines for the Euro, down by 0.1% against the Dollar and 0.6% versus Sterling. Despite a four month bailout extension being agreed between Greece and its creditors on Friday, negotiations between the Syriza party and the Eurogroup are far from over. Greece’s government began the week putting the finishing touches on its proposed economic reforms, due to be discussed by Eurozone finance ministers today. The result of the discussions will determine whether or not the proposed extension will be formally accepted.

The only data releases of note came from Germany with the monthly IFO business confidence indicators all disappointing on forecasts. However, the expectations and business climate indices both climbed on last month to 102.5 and 106.8 respectively. The business climate index, based on a survey of 7,000 German firms, registered its strongest reading since July, boosted by the announcement of the ECB’s quantitative easing measures in late January.

A number of key data releases in the Euro-area this morning will begin with detailed growth data for Germany at 7am London time. Revised inflation data for the Eurozone at 10am may also cause moderate volatility if it surprises further on the downside. Later in the day, ECB President Mario Draghi will be making the first of his two speeches in consecutive days at the unveiling of the new €20 banknote in Frankfurt.

USD

The Dollar briefly touched a ten day high against its major peers, although the US Dollar index ended roughly unchanged.

Sales of previously owned homes in the US declined more than forecast in January. The existing home sales change indicator, as measured by the National Association of Realtors, was down by 4.9% in January to 4.82 million, the least since April. A lack of supply of affordable housing has led to many individuals being priced out of the housing market of late. Earlier, the Chicago Fed national activity index edged up to +0.13 in January compared to -0.07 a month before.

Today will see plenty of data out in the US likely to cause volatility in the Dollar, including consumer confidence at 3pm GMT. This will run in parallel to the beginning of a two day semi-annual briefing between Federal Reserve Chair Janet Yellen and the US Congress, where Yellen will discuss Fed policies and the current economic environment.

Rest of the world

The Bank of Israel surprised markets by slashing its benchmark interest rate to a new record low of 0.1% on Monday. The move comes in an effort to boost inflation that has been hampered by the recent tumbling oil prices.

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Written by Enrique Díaz-Álvarez

Chief Risk Officer at Ebury. Committed to mitigating FX risk through tailored strategies, detailed market insight, and FXFC forecasting for Bloomberg.