EURO/GREECE

There has been a wealth of critical news to follow this week . Starting with the most recent; Greece has now requested the bail-out extension for six months and the EZ finance ministers will meet tomorrow afternoon to discuss it.

This is seen as a positive for the euro however caution is the watchword as the the two sides of this negotiation are still far apart and Greece has attached its own conditions to the extension which up to this point have been firmly resisted in Europe. A rumour has hit the wire that Germany have rejected the proposal. We shall have to watch to see how true this is.

If the deal is acceptable it is only for another period of negotiation but it will avoid any short term risk that the country defaults. The German finance minister is still hard lining so it is not a done deal yet. There is also the question of emergency lending. Greece has asked for 10bn increase , the ECB agreed to 3.3bn . This is for now crucial aid  but the EZ can review it and potentially withdraw at any point.

With QE still ahead there is a potential for more shorts on a Euro ‘releif rally’  but this is a choppy and unpredictable period and if in doubt, stay out, there are other pairs and other opportunities.

 The US 

In the US the Fed minutes disclosed a more than expected dovish leaning. There are differing views but the majority are ‘nervous’ of early hikes. Also the data flow has been under expectations for the most part with maufacturing Index, PPI and building permits all missing the mark. Watch out for unemployment claims this afternoon. These are very important numbers for the FOMC and next week Janet Yellen their Chairwoman is speaking so expect a quiet market until then. . The index has been in a consolidation period which is likely to continue until more light is shed by Yellen.

The GBP

The GBP has strengthened this week, not only on Carney’s words but on jobs data. It wasn’t just the unemployment claims robustly beating the estimate but signs of wage growth. Both encouraging in the long term recovery and does bode well for a GBP rally at least until those General Election jitters start to make their presence felt.

The inflation outlook for the UK is still expected to see it dip, even into negative territory however, as in the US, this would be expected after the oil price drop. But a good week for the UK. The uptrend in the GBPUSD continues for now  as it approaches an important level.

Oil

Finally a note on oil. I did mention inventories at the beginning of the week. The price took a big drop yesterday and still some downside today. It is hard to see it rising much further at this point but essential to watch. A volatile range is a likelihood.

Judith Waker

fotistradingacademy.com