Euro-Zone Inflation Slows Allowing ECB To Remain On Hold

Fundamental Headlines

• Greece to Outline New Austerity Plan – Wall Street Journal
• Australia Tightens Rates Again – Wall Street Journal
• Plan to give Fed consumer watchdog role - Financial Times
• EU Sets Clock Ticking on Greek Budget Reduction as Talks With Merkel Near – Bloomberg
• Emerging-Market Stocks Climb to Five-Week High; Pound Drops for Fifth Day- Bloomberg

EUR/USD – The February Euro-zone consumer price estimate slipped to 0.9% from 1.0% as domestic demand has started to wane as the pace of the recovery slows. An 11 year high of unemployment is putting pressure on wages which should continue to make it difficult for companies to pass on costs to consumers. The lack of price pressure will allow the ECB to remain on hold at this week's policy meeting and probably into the latter part of the year. Meanwhile, producer prices rose 0.7% in January from 0.1% the month prior, surpassing forecasts of 0.6%. Producers may start to see profits squeezed if consumers continue to retrench and the labor market struggles to generate jobs. To discuss this and other topics, please visit the EUR/USD forum.

USD/CHF – Swiss GDP grew for a consecutive quarter at the end of last year by 0.7%, signaling that the country’s recession is over. The improvement surpassed estimates of 0.4% and rose from a upwardly revised 0.5% in the prior period. However, government consumption led the way with a 1.7% contribution, offsetting a slowdown in exports to 1.6% from 3.3%. Weakening demand from abroad could limit the future pace of growth and lead to a period of stagnation which will make it formidable for the SNB to raise rates.