Last night European Finance Ministers prolonged the inevitable yet again and ensured that unnecessary uncertainty would remain within the markets for at least a further week. Greece could well go bankrupt this week; however this is not going to happen. European leaders won’t allow it to happen, and it is this very reason why markets are becoming frustrated. Frustrated with European finance ministers and their inability to reach a compromise over exactly how Greece’s ever increasing black hole should be plugged.
Ministers did however manage to push back to 2022 the goal of getting Greece’s debt down to a sustainable level, although there was still disagreement amongst ministers over this issue, most notably from IMF Managing Director Christine Lagarde. This miniscule achievement has done little to help reassure the markets this morning as the Euro is down against Sterling and has hit a two month low against the Dollar. Such movements coincided timely with the release of EU and German confidence surveys, for both of which the results were appropriately down.
The Pound’s strength this morning is likely down to the positive Consumer and Producer price index figures released at 9:30. The UK Consumer Price index (YoY) figure hit 2.7%, surpassing market expectations of 2.3%, whilst the UK Producer Price Index – Output (YoY) remained flat at 2.5%. This led to a sharp spike in GBP/EUR as it hit 1.2546 and GBP/USD reached 1.5904 before leveling out. With little more economic data due out for the rest of the day other than the US Monthly Budget Statement at 19:00, the driving force behind any rate movements today will be the ever worsening situation in Greece.