Euro upside following Greek deal
Having retreated from near two-week highs as optimism over the long-awaited Greek bailout deal faded to be replaced by underlying concerns over growth and implementation risks, the euro has traded in a relatively tight range versus the dollar over the past 24 hours. Parliaments in three countries (Germany, the Netherlands and Finland) must now approve the package, though markets are generally optimistic that this will happen. Markets will turn their attention to eurozone growth today with the February flash PMIs due for release this morning. Lead indicators from the eurozone have improved of late and reasonable data today could see the market pull back further in terms of its view of further rate cuts in the eurozone. Today also sees the release of the Belgian business confidence index for February, another good lead indicator for general eurozone sentiment.
The yen dipped against the dollar in overnight trade, touching a fresh six-month low as it remains on the defensive following the Bank of Japan’s surprise monetary easing last week. Further downside risk is seen near term, with the dollar threatening key resistance at the Y80 level. The last time the dollar traded above this level was last August, but evidence of steady buying by Japanese importers could put the US currency on track for its biggest monthly gains for nearly two years. Sterling will be looking to this morning’s release of the February’s Bank of England minutes, which are expected to show that policy makers were unanimous in their decision to increase the asset purchase scheme by Stg50 billion. Aside from the voting pattern, markets will also be looking for the any indications that the central bank has left the door open to further monetary support.