Euro sold as Greek Deal lingers
The euro started yesterday with a firmer tone on the news that China would continue investing in euro debt and pledges from the Greek opposition Conservative Party to commit to tough austerity measures. This was before the latest twist in the on-going Greek debt saga saw renewed pressure on the single currency, which has fallen back to trade at three week lows to the dollar, at around the $1.30 level. This follows reports that the EU was considering delaying all or part of the latest Greek bailout package, though hoping to avoide a chaotic default – possibly through the provision of a bridging loan. Comments from Juncker, Chair of the euro group of finance ministers, that substantial progress has been made in bailout talks and that he was confident that the group will come to an appropriate decision when it holds its regular monthly meeting on Monday, failed to stop the euro’s slide. Against this background, the news that the eurozone economy contracted by 0.2% in the final quarter of last year had little impact, with the data broadly in line with expectations.
Meanwhile, the minutes of the January FOMC meeting showed additional QE a possibility to help stimulate the US economy, further denting risk appetite and, as such, providing the dollar with some additional support.
Sterling gained against the generally weaker euro following the Greek news. It also took some support in earlier trading from the tone of the BoE’s quarterly inflation report, which contained an upward revision to the two year inflation expectations and, as such, dampened somewhat expectations of further quantitative easing. Whilst Sterling trades at the bottom end of the range against most counterparts at present the rate to buy Euros has improved by over 1% from yesterdays low – this provides buyers with an opportunity to get out of the market while we trade near the high.