Greece continues to dominate the headlines this week. Today will be no different, with a vote of confidence due at 21.00 GMT. The Greek government needs to pass the vote to receive another tranche of bailout funds. Stock markets have opened down this morning and there is a general air of unease around, but the Euro has defied the odds and is strengthening against both the Dollar and Sterling. The important German economic sentiment indicator is due at 10am, with expectations of a slight decline, any unexpected number to the upside with push the Euro higher going into the US open. The lack of substantive Euro zone data for the rest of the week means Greece will continue to hog the headlines. The President of the ECB and Bank of England Governor are both due to speak on Wednesday evening but are unlikely to use the platform of a conference on systemic risk to say anything that could make the Greek situation any worse than it already is.
Sterling lacks any real direction at the moment as we wait for the release of the Bank of England minutes. Mervyn King used a speech last week to outline that the Bank had been targeting growth as well as inflation, and I think the speech was a primer for the markets to expect a dovish minutes tomorrow. Public sector borrowing, just released, was mixed but overall negative and as a result Sterling is off around half a cent against both the Euro and Dollar.
The Federal Reserve meets to decide US interest rate and, more importantly, the path of QE over the next year (or more). Fed Chairman Ben Bernanke indicated a further round of QE is unlikely at the moment, but the market will be monitoring the press release closely for any hint of a change in Fed sentiment. Will the Fed be influenced by recent stock market declines on one side, and/or the US governmental debt problem currently playing itself out in Washington? Probably not, but it is making the narrow path the Fed is walking even narrower.
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