Raphael Sonabend, FX Analyst
The Eurogroup meetings collapsed in acrimony yesterday as Syriza refused ‘unacceptable’ Eurozone demands. Greece was given an ultimatum yesterday evening, they must either agree to maintain the current bailout plan by Friday or face the consequences. As Greece have been refusing these requests thus far, a ‘dirty Grexit’ has loomed its head once more. Greece’s Finance Minister Varoufakis was more optimistic, claiming that an “honourable agreement” was within reach. Whilst the next official meeting is not until Friday, Varoufakis has said talks will continue throughout the week, which will surely lead to further euro volatility. Whilst reports will be closely watched today we also have an important day in the data calendar with UK CPI at 9:30 and German ZEW economic sentiment at 10:00. These sets of data may have less impact as traders focus more on the Greek debt crisis.
GBP/EUR: Currently trading at 1.3531
- This pair broke 1.35 yesterday evening and this time, it looks set to stay above the mark. As the Eurogroup meetings ended in disarray yesterday, with Greece confident that a deal would be reached and the rest of the Eurogroup more pessimistic, the euro plummeted against counterparts. Hopes of a euro recovery in the short-term will be pinned on a compromise being reached this week.
- Whilst important data is out today, it may be overshadowed by further reports from Greece. UK CPI is forecast to drop from 0.5% to 0.3% this morning and German ZEW economic sentiment is predicted to rise from 48.4 to 55.4. The usual consequence of these results would be euro strength however UK CPI could be priced into the markets already and tensions around Greece may outweigh low UK inflation.
GBP/USD: Currently trading at 1.5356
- The dollar recovered some lost ground yesterday, pushing this pairing back below 1.534 briefly before the pound resisted further dollar gains. Early pressures on the pound are unlikely to be the start of a downward Sterling trend and low inflation this morning could boost a pound reversal.
- Today’s focus will be on UK data this morning before tuning in to Eurozone news to see if any resolutions can be made. Whilst further meetings are postponed until Friday, Varoufakis has said the government will continue talks regardless of an ultimatum. As global risk appetite decreases, Sterling and dollar could see further strength.
EUR/USD: Currently trading at 1.1347
- The euro lost a cent on the dollar yesterday as Eurogroup talks broke down as Greece rejected demands. Whilst the Greek government remained positive, the Eurogroup chair Dijsselbloem said that now it is up to Greece to accept the program the way it is now. As tensions soar, the euro will likely continue to be sold-off.
- A strong figure is forecast for the German ZEW economic sentiment this morning but this will likely be overshadowed by reports out of Greece. Volatility and euro weakness can be expected to continue.
GBP/AUD: Currently trading at 1.9701
- Yesterday we saw recent trends continue as the rate gradually fell throughout the course of the day. Earlier this morning, the RBA released the minutes from its recent monetary policy meeting, expressing concerns about the strength of the Aussie, in particular against the Yen and euro. However, this failed to stir the market as the announcement presented no new information.
- Following the positivity generated from the UK inflation report last week, we could see sterling strengthen again today on the back of the CPI announcement this morning.
GBP/NZD: Currently trading at 2.0442
- Fairly range-bound trading was seen in this pair as focus has been lifted off commodity-currency pairings. Trading around the 2.046 mark, previous trends suggest that the pound should receive support around 2.0425.
- UK CPI this morning is forecast to drop off from 0.5% to 0.3% and given the reaction to last week’s speech from Carney, this could bring Sterling strength. The GDT price index is due from NZ at any point today and volatility may be seen in anticipation of its release.
GBP/CAD: Currently trading at 1.9095
- The Loonie was able to bank steady gains throughout yesterday’s session as Crude continued to edge higher. In a perfect reflection with oil’s upward trend, the Loonie strengthened against Sterling.
- UK inflation this morning has been predicted to hit the lowest level in 25 years and this could bring Sterling strength after a positive reaction to last week’s BoE report.
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