Yesterday was hardly a thrilling day in markets. Investors and speculators took the euro lower through the session as any conciliatory moves for the single currency, in light of a deal between the Greeks and the remainder of the EU, were quickly forgotten about. There is little more to the four month extension than a near-term stay of execution for the Greek government in some people’s eyes. I am certainly unsure as to how a four month extension does anything but weaken Tsipras and Varoufakis’ bargaining position.
Whether it was as a result of the Greek bank holiday yesterday or other matters, the submission of the list of commitments that Syriza wants attached to the bailout extension was not made by Greek authorities. Most of these are Syriza election pledges for boosting the working mans’ economy, including measures to tackle problem of non-performing loans i.e. those who have overdue repayments, overdue tax repayments, and protections of primary residences.
Eurogroup members will be reconvened for a teleconference on these measures and more – moves around tax evasion and corruption – later today. Who’s to say that the lack of concrete positive sentiment around the ongoing Greek situation isn’t exacerbated by a voting down of these measures as “not tough enough” by the Germans?
Today however is more about central banks than nation states with the heads of the Bank of England, European Central Bank, Federal Reserve and Bank of Canada all delivering speeches.
Mark Carney will appear in front of the Commons Treasury Select Committee to answer questions around the Bank’s Quarterly Inflation Report alongside other macroeconomic issues. This shouldn’t provide too much of a grilling for the Governor given the Bank of England was seen to strike an optimistic chord for the British economy in the report. Carney’s overall statement was bullish on growth, positive on wages and, most importantly, pointing to a recovery in inflation within their forecast period of the next two years.
Once again sterling has pushed higher versus the euro in the past few sessions increasing its value on a trade-weighted basis to fresh seven year highs. While the Monetary Policy Committee has remained quiet on this so far, I would not be surprised if we saw some concern expressed today. Carney’s testimony starts at 10am.
While Draghi’s pronouncements are normally market-moving, given that he is speaking at the unveiling of a new EUR20 note we would be surprised if anything macroeconomic came out of this.
Yellen’s testimony to the Senate Banking Panel in Washington DC is much more likely to give markets a jolt this afternoon. While there has been some very encouraging news from the US economy in the time since the last Federal Reserve – January’s jobs report for example – there has also been poor inflation and industrial reports.
As a result I am looking for Yellen to keep the Fed pointed in a rather straight line this afternoon than show a change in policy direction anytime soon. These testimonies by the Fed Chair have become less about monetary policy in recent years and more about Senators and Congressmen/women bloviating about how close the Fed is to the banks that it regulates or how large its balance sheet has become. Yellen begins her testimony at 3pm.
