EU Morning Report - Greece agrees on further austerity

The euro produced moderate gains against its major counterparts after Greek political leaders reached an agreement on additional fiscal reforms. Lawmakers will vote on these measures over the weekend and all eyes now to turn to Greece’s parallel negotiations with the Institute of International Finance (IIF). The institution is representing the private lenders during talks with the Greeks over the terms and conditions of the agreed haircut. The parties involved need to reach a deal by the 13^th of February, for the International Monetary Fund to sign off the aid package, vital in paying off a sizeable bond redemption on March 20^th. The European Central Bank did not proceed to any changes in its policy. Versus the US dollar, the single currency rose to 1.3275 from 1.3246. Against the Swiss franc, the euro moved up to 1.2110 from 1.2100. The 1.20 floor on EURCHF set by the Swiss National Bank is in the centre of attention as deflationary pressures are the catalyst for further intervention according to the central bank. The Consumer Price Index release today at 08:15 GMT is particularly interesting.

The US dollar produced mixed results against a basket of currencies as Unemployment Claims for past week came out slightly better than expected. The greenback stayed mostly on the sidelines as trading was motivated by the ongoing developments in the Greek saga and central banks’ policy announcements. At 17:30 GMT Fed Chairman Bernanke is due to deliver a speech on the US housing market and investors are expected to closely monitor this.

The British pound opened at 1.5810 and closed at 1.5812 versus the US dollar. The Bank of England announced a further GBP 50 billion of asset purchases. Governor King pointed out to some positive signs but stated that eurozone issues are a major concern. Earlier, better than expected trade and industrial production data were released.