Daily Report: Euro Rises as Venizelos Heads to Brussels, ECB and BoE Watched

Euro manages to extend recent rally against dollar and yen even though the Greek situation remains unresolved. Greek officials sounded optimistic as a statement from Prime Minister Papademos said that political leaders have “agreed on all the points of the program with the exception of one which requires further elaboration and discussion.” It’s believed that pension reform is that stumbling block. Finance Minister Venizelos will travel to Brussels to meet with Eurozone finance ministers today. Venizelos is hopeful that “there is agreement on all issues” with political leaders “bar one”. Prime Minister Papademos will stay in Athens striving to complete the austerity deal before EU finance minsters meeting. Before that, focus will first turn to ECB and BoE meetings.

Although Greece’s PSI and its access to the new tranche of bailout fund dragged on, market sentiment appeared to have improved since the last ECB meeting. Moreover, reaction to the 3-year LTRO was positive while economic data over the past few weeks showed improvement. These should allow the ECB to keep the main refinancing rate unchanged at 1% and leave the unconventional monetary measures unchanged.

In the UK, the BoE is expected to expand its asset purchases by 50B pound in February. The country’s economy has remained subdued and the stubbornly high inflation has started to moderate. Moreover, the previous asset purchase program is about to expire. The February meeting is probably the best timing to extend the amount further.

More in ECB To Stand On The Sideline While BOE To Extend Asset Purchases

Employment data from New Zealand was mixed. Q4 employment growth unexpectedly slowed to 0.1% qoq but unemployment rate also dropped to 6.3%. China PPI slowed as expected to 0.7% yoy in January. However, CPI jumped back to 4.5% yoy. The data might reinforce officials’ concern that inflation is not going away yet and could complicate the plan to add stimulus to revive growth, lowering the possibility of policy loosening. Other data released saw Japan household confidence improved to 40 in January. Looking ahead, UK production, trade balance, US jobless claims, wholesale inventories and Canada new housing price index will be featured later today.

Daily Pivots: (S1) 101.72; (P) 102.08; (R1) 102.51; More

EUR/JPY’s rally resumed after brief consolidations and reaches as high as 102.77 so far today. Intraday bias remains on the upside for the moment. Current rally from 97.03 is expected to continue towards 100% projection of 97.03 to 102.20 from 99.24 at 104.41. On the downside, below 101.65 minor support will turn bias neutral first. But near term outlook will remain cautiously bullish as long as 99.24 support holds.

In the bigger picture, fall from 123.31 is part of the down trend from 2008 high of 169.96 and should target 100% projection of 139.21 to 105.42 from 123.31 at 89.52. At this point, we’d anticipate strong support there to bring at least a rebound attempt, as it’s close to 88.96 all time low as well as100% projection of 123.31 to 100.74 from 111.57 at 89.00. Though, a break of 111.57 resistance is needed to be the first signal of medium term reversal. Otherwise, we’ll continue to stay bearish in the cross even in case of rebound.

GMT
Ccy
Events
Actual
Consensus
Previous
Revised
21:45
NZD
Unemployment Rate Q4
6.30%
6.50%
6.60%

21:45
NZD
Employment Change Q/Q Q4
0.10%
0.40%
0.20%

23:50
JPY
Japan Money Stock M2+CD Y/Y Jan
3.00%
3.10%
3.10%
3.20%
1:30
CNY
PPI Y/Y Jan
0.70%
0.70%
1.70%

1:30
CNY
CPI Y/Y Jan
4.50%
4.00%
4.10%

5:00
JPY
Household Confidence Jan
40
38.5
38.9

6:45
CHF
SECO Consumer Confidence Jan

-22
-24

9:30
GBP
Industrial Production M/M Dec

0.20%
-0.70%

9:30
GBP
Industrial Production Y/Y Dec

-3.10%
-3.10%

9:30
GBP
Manufacturing Production M/M Dec

0.20%
-0.20%

9:30
GBP
Manufacturing Production Y/Y Dec

0.30%
-0.60%

9:30
GBP
Visible Trade Balance (GBP) Dec

-8.4B
-8.6B

12:00
GBP
BoE Rate Decision

0.50%
0.50%

12:00
GBP
BOE Asset Purchase Target Feb

325B
275B

12:45
EUR
ECB Rate Decision

1.00%
1.00%

13:30
EUR
ECB Press Conference

13:30
CAD
New Housing Price Index M/M Dec

0.50%
0.30%

13:30
USD
Initial Jobless Claims

370K
367K

15:00
USD
Wholesale Inventories Dec

0.50%
0.10%

15:00
GBP
NIESR GDP Estimate Jan

0.10%

15:30
USD
Natural Gas Storage

-82B
-132

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Greece mulls harsh new cuts in bailout talks

Crucial talks to discuss austerity cuts in Greece broke down
after eight hours Wednesday as leaders of the three parties backing
the country’s coalition government failed to agree to demands from
international creditors for substantial cuts to state and private
pensions.

Papademos left the meeting to negotiate with the ‘troika’ of
Greece’s creditors _ the European Union, the European Central Bank
and the International Monetary Fund _ on the cuts needed for Greece
to reach the fiscal targets prescribed by the troika for 2012. He
is joined in the negotiation by Finance Minister Evangelos
Venizelos and Labor Minister Giorgos Koutroumanis.

A statement issued from office of Prime Minister Lucas
Papademos’ office says that the Prime Minister and the three
leaders _ socialist George Papandreou, conservative Antonis Samaras
and right-wing populist Giorgos Karatzaferis _ “agreed on all
points (presented by the creditors) except one which calls for
further discussion and elaboration with the troika.”

At stake is a euro130 billion bailout that is vital if Greece is
to avoid bankruptcy as early as late March.

The leaders’ talks hit a snag over a euro300 million gap in cuts
needed to reach the 2012 fiscal target. The troika has proposed
cuts in supplementary state and private pensions above a threshold
level of euro150. Private pensions in Greece are
state-guaranteed.

Samaras has made clear his objections, proposing as an
alternative a euro300 threshold plus “fiscally equivalent
measures.”

Among the proposals the leaders did accept is a 22 percent cut
in the gross monthly minimum wage from euro751 to euro586, with the
minimum wage dropping to euro527 a month for those under 25.

On leaving the meeting, Karatzaferis told reporters that “I made
my positions clear from the beginning…I wanted to support Mr.
Samaras on that issue (pensions).”

Private media are reporting that, if Papademos’ talks with the
troika hit a snag, he will call the leaders on a meeting again,
either overnight or early Thursday.

Complicating the negotiations are the political leaders’
posturing over which party cares more for the people. Samaras,
speaking from his party’s headquarters, said that he “wants to ease
the people’s suffering,” adding that the negotiation is difficult
and that “for some, it is a novelty to negotiate,” a barb aimed at
Papandreou, whose two-year socialist government gave way to the
coalition government last November. Samaras is the favorite at
polls to win a possible snap election.

Speaking through his party spokesman, Panos Beglitis, Papandreou
countered that he would not let Samaras’ objections on
supplementary pensions hurt people’s main pensions. “We are ready
to scuttle any agreement,” on that point, said Beglitis.

Jacob Funk Kirkegaard, research fellow at the Peterson Institute
for International Economics, said the lack of progress made during
Wednesday’s talks highlights the “certain amount of political
theater involved here.”

“The political leaders in Athens are campaigning,” he added.
“They need to be seen by the Greek population as fighting until the
very last drop of blood. … They are facing off against the
Germans and IMF and the rest of the world.”


Crisis: Greece signs deal with EU to boost tourism

Crisis: Greece signs deal with EU to boost tourism

Off-season travel programme between S. America and Europe

07 February, 12:42