The Eurozone is teetering on the edge of potential catastrophe, as what seem to be never ending Greek bailout talks have still not progressed to a concrete solution. It had been hoped that the Eurozone Central Bank, key EU Finance Ministers and New Greek Finance Minister Yanis Varoufakis, would have finally reached an agreement of acceptable terms, with which to save the Greek Nation from so called ‘Greek Austerity’.
The most recent bailout update is that after delaying for a further 24 hours, last night a list of terms were released (leaked!) briefly comprising; Fairer Tax, a crackdown on tax evasion and corruption, tackling smuggling and making more funds available to assist the poorest with healthcare and housing.
Put simply, these terms had always been expected, but have taken the thick end of 1 month to put on to paper! With the amount of uncertainty created, the markets have reacted very poorly to every delay to an announcement, leading GBP – EUR to trade a 7 year record highs – Euro buyers have seen a gain of over 10 Cents since December!
I personally do feel that the Greek bailout terms will be agreed shortly, potentially providing a small window of opportunity for Euro sellers to take advantage of.
However, whether the longer term outcome will be positive for the Eurozone remains to be seen, as this is just an extension of the bailout repayments. Greece will only have until end of April to finally achieve its desired debt restructure. This will ensure further uncertainty for weeks to come.
Aside from Greek issues, the week ahead is busy for Eurozone data releases. Eurozone Inflation data is released this morning, followed by a statement on the new Monetary Easing Policy (Quantitative Easing) from ECB Governor Mario Draghi. Towards the back end of the week there are several GDP announcements for Eurozone members, giving an indication to strength of the combined member states.
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The UK GDP figure for Quarter 4 2014 is released Thursday morning, with analysts predicting a slight reduction for the Quarterly figure. This could provide a slight window of opportunity for those looking to buy Sterling, should the figure be poor. That being said the Pound has made good continued growth, indicating the UK economy could finally be back on track.
All is not clear sailing from the Pounds point of view, as in just over 2 months the UKs most openly contested General Election will be coming to a head. With the UK Voting Public so split, parties will have to be bold with policies in order to gain the majority. Therefore expect big swings in both directions. Those able to conclude their transactions prior to the start of the campaign trail warpaths would save themselves a lot of worry by acting now.
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Janet Yellen (Chair of the US Federal Reserve) has two days of scrutiny on her hands, as she’s quizzed by Congress as to the state of the US Economy. The recently released ‘Federal Open Market Committee’ meeting minutes surprised the markets, as they were less positive than preceding reports. There was less of a nod towards a ‘mid-year’ interest rate rise indicating the Greenback could not quite be the dominant force that investors thought. This has weakened the Dollar steadily over the last weeks with increased scrutiny now on US data and announcements.
Along with the Yellen testimonies, a sharp eye should also be cast on the US Consumer Confidence figure, released at 15:00 (also when Yellen starts her meeting). The figure is predicted to have declined, which if tied with negative sentiment from Yellen towards an interest rate rise, could lead to a further slip for the US Dollar.
The latter stages of the week also have key data releases; Consumer Price Index (Inflation) figures on Thursday at 13:30 and overall US GDP figures on Friday, also at 13:30.
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The Swiss Franc lost 2% in yesterday’s trading alone, as markets still react to the Swiss amendment to their international trading ability. After removing the trading peg guaranteeing Swiss Exporters a cap on the exchange rates, the impact on the economy is being documented.
The Swiss had a poor forecast given last week which has weakened the currency further.
As the Swiss Central Bank previously alluded to further monetary easing or interest rate reductions, those selling CHF may wish to take advantage before yet more movements…
With the currency markets moving every two seconds, it can be vitally important to be aware of what is driving the currencies in or out of your favour. Click here for live exchange rate.
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