Euro Sunk As Greece Bailout At Risk, Sterling Troubled By Disappointing Mortgage Approvals

Talking Points
•    Japanese Yen: Mixed As Risk Appetite Wanes
•    Pound: Disappointing Mortgage Approvals Begins To Weigh
•    Euro: Sunk As Greece Bailout Unravels
•    U.S. Dollar: Consumer Prices, Initial Jobless Claims on Tap

Euro Sunk As Greece Bailout At Risk, Sterling Troubled By Disappointing Mortgage Approvals

Greek Prime Minister Papandreou in a speech in Brussels today stated that the country doesn’t need aide at this time but is taking “IMF measures” and may need to seek help from the International lender of last resort if a European solution isn’t generated. Meanwhile, the Euro-zone January trade balance deficit widened more than expected to -8.9 billion against forecasts of -4.0 billion as exports rose 5.0%. Consistent demand from abroad has fueled the region’s recovery and evidence of continued growth could be offsetting concerns over Greece’s troubles.  The EUR/USD has found support at the 20-Day SMA at 1.3636 and retraced some of its earlier losses. If we see equity markets shrug off the news then a further gains could follow. However, a break below support opens the door for a test of 1.3500

The Pound has started to trade lower after a brief relief rally following the smaller than expected budget deficit in February. The better fiscal health has alleviated some concerns that the U.K. could follow its European counterparts down the path of lower credit ratings. Public borrowing rose 12.4 billion against expectations of 14 billion, but increased from 4.3 billion the month prior. However, the deficit continues to be a troubling issue for the country and a political lightening rod. Sterling weakness may continue, if markets choose to focus on the disappointing mortgage approvals in February. Approvals from the six largest banks fell to a nine month low of 48,000 down from 49,000 the month prior. Economists forecasted a print of 54,000 as prior quantitative easing efforts were expected to help loosen credit markets. The disappointing data could raise speculation that the BoE may need to add to their asset purchase program which had been a weighing factor before the last two pauses e by the central bank.

The dollar was mixed overnight as it gained against the Euro but has started to lose ground against the commodity dollars and sterling, which have been the outperformers leading into the day. U.S. consumer prices are scheduled to cross the wires today with expectations that inflation fell to 2.3% from 2.6%. A weak labor market which lost another 36,000 jobs in February has weighed on domestic demand, forcing retailers to continue discounting to attract customers. The potentially market moving release may have little impact following a FOMC rate decision, where policy makers pledged to keep rates low for an “extended period”.  The weekly initial jobless claims data could have more of an impact of price action as a return to job growth is seen as a key to the recovery and a prerequisite for a rate hike. The Philadelphia Fed manufacturing release should also be monitored as the sector has driven the recovery and evidence of sustainability could generate risk appetite and dollar weakness.


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To discuss this report contact John Rivera, Currency Analyst: jrivera@fxcm.com