Posted on February 17, 2015 by the XM Investment Research Desk at 8:27 am GMT
The euro fell below the 1.14 level after Eurozone finance ministers failed to agree with their Greek counterpart over a formula for the next steps in Greece’s bailout. The point of contention was whether an extension to the current program would be implemented or if a new program would be initiated. The Greek Finance Minister rejected a proposal by the Eurogroup Chairman, although an earlier proposal by the Commissioner for Economic and Financial Affairs was more acceptable to the Greek side. Time for a deal on Greece before the current bailout expires was short and Greece had until Friday to request an extension.
Markets took note of the negative developments on Greece, but their reaction was measured. The longer it takes a deal to be reached, the greater the likelihood of adverse developments, although many analysts expect negotiations to drag on until the 11th hour.
The minutes from the Reserve Bank of Australia meeting earlier in February, when interest rates were cut to 2.25% from 2.50%, showed that the committee was concerned about the deteriorating economic outlook but was also worried about the strength in house prices. The aussie gained on the less-dovish-than-expected minutes, rising to just below the 78 cents level against the US dollar.
Looking ahead, UK inflation for January will come out and it is expected to post a significant decline 0.8% month-on-month (due to seasonal factors such as the post-Christmas sales) and the year-on-year rate to drop to as low as 0.4%. The German ZEW investor sentiment survey will also come out. Although the US will return to work following the President’s Day holiday yesterday, no major data points are expected.