Posted on February 12, 2015 by the XM Investment Research Desk at 8:07 am GMT
Foreign exchange majors were little changed during today’s Asian session. The US dollar stayed above the 120 level versus the yen (around a 1-month high), whereas the euro returned to the 1.1315 level. The euro’s trading range increased from 1.1277 to 1.1350 during the previous day as the pair awaited news from a crucial Eurozone finance ministers’ marathon 7-hour meeting in Brussels. Rumors of some sort of deal between Greece and its creditors helped the euro higher initially, only for the pair to return to previous levels as there was no agreement – not even on a joint statement or the next steps to take. The ministers would meet again on Monday during a regular Eurogroup meeting. It appeared that Greece refused to ask for a bailout extension or to talk to the Troika of international lenders, as its Eurozone partners have suggested.
The market’s reaction to the stalemate has been more or less sanguine, as most market-participants believe there will be a deal in the end. Many assume that hard negotiations involve starting out with tough positions. However, there is also the risk of a miscalculation as well as the issue that time is limited until the end of February when the current bailout ends.
In economic news, Australian unemployment for January jumped to 6.4% compared to December’s 6.1% print and economists’ expectations of a rise only to 6.2%. It was the highest rate of unemployment in Australia for 12 ½ years. Although Australian employment numbers have been volatile in the past few months, the numbers reinforced the view that the Reserve Bank of Australia will cut rates further in coming months. This led to a sharp drop of the Australian dollar against the US dollar to as low as the 0.7643 level, although the 5 ½ year low registered at the beginning of February (0.7627) was not tested yet.
Looking ahead, the quarterly Bank of England inflation report is likely to attract a lot of attention. Sterling has been relatively resilient, making a fresh 7-year high against the euro and also making a comeback against the US dollar – rising above the 1.53 level at some point a few days ago. Given that the Governor of the Bank of England has sounded mostly dovish in his appearances, it will be interesting to see how his press conference will influence the pound. Later, US advance retail sales for January will come out, which will be the day’s most important economic statistics. Overall it should a busy day ahead, with an EU leaders’ summit and ongoing negotiations in Minsk on the conflict in Ukraine.