22 Feb 2015

Greece remains part of the Eurozone for now as austerity reforms fall due

United States Dollar: Greece/EU talks didn’t break down over the weekend as feared and Greece remains part of the Eurozone this morning. On Friday, Greece and its EU and IMF lenders agreed to submit a list of reforms by Tuesday this week in order to secure a bailout extension. GBP/USD has therefore been relatively steady since Friday as markets wait for said reforms to be ratified and it opens this morning at 1.5375. While attention remains firmly fixed on Greece and EU negotiations, traders and investors will also be looking to a series of speeches and comments from ECB President Draghi, Fed Chair Yellen and Bank of England Governor Carney. The latter is due to testify before parliament on Tuesday and will most probably reiterate that the next move on interest rates from the central bank will be a hike, although it remains sometime off. Yellen is due to testify before the Senate Banking Committee on Tuesday and Wednesday. US inflation data is then released on Thursday, followed by US Prelim GDP on Friday.

We expect a range today in the GBP/USD rate of 1.5300 to 1.5400

Euro: EUR/USD made solid gains on Friday afternoon after Greece said that it would agree to prepare and submit a list of reforms in order to secure an extension to the country’s bailout. Greek Finance Minister Yani Varoufakis told reporters on Saturday that “we are very confident that the list is going to be approved by the institutions and therefore we are embarking upon a new phase of stabilization and growth”. The problem for the new government is that it seems like a big climb-down from promises made in the run up to the elections as their plans still need to be approved by troika (or at least some form of troika), but as far as the markers are concerned so far, the news is positive. These reforms reportedly include measures to combat tax evasion worth €7.3 billion but it’s likely that further austerity measures will be required. EUR/USD traded to a high of 1.1425 late on Friday but it has fallen back a bit overnight to open this morning at 1.1330 as the dollar opens generally firmer. GBP/EUR has continued to tick along just shy of 1.36 in the meantime.

We expect a range today in the GBP/EUR rate of 1.3520 to 1.3610

Aussie and Kiwi Dollars: AUD/USD and NZD/USD have weakened since Friday. The kiwi has been under a bit of pressure following a speech by NZ Prime Minister John Key who was talking about the threats that fruit fly pose to the NZ horticulture industry. There are also a few concerns for the state of NZ inflation expectations due later tonight. AUD/USD is falling more quickly in early Europe and has dropped below .7800 to trade at .7785 currently. Both GBP/AUD and GBP/NZD are a touch higher as a result and open this morning at 1.9745 and 2.0510 respectively.

We expect a range today in the GBP/AUD rate of 1.9650 to 1.9850

We expect a range today in the GBP/NZD rate of 2.0410 to 2.0620

Data Releases

AUD: No data

EUR: German Ifo Business Climate

GBP: CBI Realized Sales

NZD: Inflation Expectations q/q

USD: Existing Home Sales

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