Greek bailout and US interest rate continue to take centre stage.
25 February, 2015
The focus this week has been largely on the Greek debate amidst a market where sentiment is largely driving rates as opposed to data. Yesterday did see some Eurozone data of note released including German GDP and Eurozone inflation data, however this all came in as predicted and as such caused little effect. The main news of the day was in the afternoon following Draghis speech and the Eurogroup meeting, that Eurozone officials had approved reform proposals submitted by Greece to extend the bailout by 4 months.
The Eurogroup said that it had begun to agree national procedures which would then require parliamentary votes in several states to give the deal final approval. With the ECB agreeing that the Greek proposals provided a valid starting point it would seem in the interim that an immediate crisis has been averted and that this situation may continue to play out in the coming months. This pushed some strength into the Euro and following this announcement it gained half a cent against GBP and around the same against USD.
However this was short-lived as the afternoon saw FED Chair Janet Yellen speak and tackle the other matter currently in the spotlight – U.S interest rate rises. Following the FOMC minutes last week there were perhaps some indications given that there was no taste from the members to look at this any time soon and “had inclined them towards keeping the federal fund rate at its effective lower bound for a longer period of time”. However in Yellens semi annual address she stated that the FED can be flexible in determining when to raise interest rates – as such this turned the table somewhat on last week’s FOMC comments and gave the USD back some of the steam it had lost previous. As a result USD almost immediately gained back its earlier losses against GBP and its strength pushed weakness back to the EUR also eroding its earlier gains.
EUR/USD unsurprisingly was fairly wild throughout the day amidst much uncertainty trading up and down albeit within roughly a 50 pip range throughout the day. Today will be a hugely interesting day to watch as we see all three heads of the major banks speak so be prepared for a likely turbulent day on the market. With inflation and interest rate rises and a looming general election in the UK, a Q.E programme and the Greek situation in the Eurozone and ongoing debate around US interest rate rises it will no doubt be a telling day where we could see a large amount of movement in the majors.
Stay in close contact with your Currency Index broker who can keep you informed of any sudden movements and assist you to get the most out of your Currency transfer.
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