No news is not good news
With little movement in the Greek situation in the past 24 hours, the majority of currency pairs were very happy to trade sideways through yesterday’s session. You could have thrown a 60 pip net over the GBPEUR range on the day with little more in EURUSD or GBPUSD.
In the run-in to the Eurogroup meeting on Thursday the pressure on Greece is becoming ever more concentrated. ECB President Mario Draghi told the European Parliament yesterday that Europe needed a “strong and comprehensive agreement” and a “quantum leap”. Alongside the comments from German Finance Minister Schaeuble that he could see the Eurozone without Greece, you would think that the Greeks would be clamouring for further talks. Not so. Tsipras’ government said yesterday that it was awaiting an invitation to further talks and would respond when asked to do so. Much like my invite to this year’s Oscars, I guess it must have got lost in the post.
In what seems like a sketch from an Armando Iannucci show, both parties are now emphasising that the ball is in the court of the other and that therefore there is nothing they can do for now. We can expect more headlines through the session as the noises from the lunatic asylum continue to float in from across the fields.
UK inflation to have seen bottom
As we previewed in yesterday’s Sterling Update, today starts off an interesting 48 hours for sterling. This morning’s inflation release is expected to show that last month’s dip in inflation into deflationary territory was a brief blip and little more. As oil prices recover and last year’s declines fall out of the inflationary basket then this will become less of an issue for policymakers and I believe that once CPI hits 1.0% – expected at 0.1% this morning – we will see the Monetary Policy Committee take the plunge.
Predictions vary from maintaining a deflationary reading of -0.1% to a run as high as 0.3%. Sterling looks like it’s building for a leg higher this morning; although it may be flat on the session so far against the USD and the euro, it is higher this morning against every G10 currency except the Swiss franc. Sterling strength may also be represented by tomorrow’s labour market report and the Bank of England minutes that could show some freshly emergent policy hawks.
German economic strength, US houses later
Elsewhere today and away from Greece, we have the ZEW survey of economic prospects within Germany at 10am which is expected to have taken a dent lower thanks to the situation between Greece and its creditors. We also have US housing starts at 13.30 which should continue the recent run of consumer-faced good news from the US economy.
