Things continue to get worse for Greece, which has been weighting on the EUR. An FT article reported that more than €10bn of deposits have been withdrawn the four largest Greek banks, forcing them to ask the Greek government for extra liquidity (from remaining Bank Support Package). This is not a good omen for the €10bn Greek auction expected next week. Marketers have been focused on the US since demand has dried up in Europe, but considering the last issuance has lost around 8% of initial value already, buyers will be wary. Despite assuring comments for the IMF and EU officials, Greek spreads over German bonds widened to their highest level since the single currency was introduced (CDS a record at 430bp). It seems that the only real solution is a bailout, but the EU/IMF argument just has too many loop holes for EU nations and lacks the German political will to push it through. We see any rally in the EUR as short-term positioning and an opportunity to build EURUSD short positions. On a side note, the Eurozone Q4 GDP came in at 0.0% q/q, increasing expectations that the ECB will remain dovish on an extended period. In Australia, headline employment change printed slightly below consensus at 19.6k vs. 20k exp, -4.7k prior. Yet, the full-time employment growth figure was strong, growing by 30 vs.11.4k exp. Interestingly, the AUDUSD didn't get a boost, suggesting that the upside in AUD might be limited. Today in the UK, the MPC convenes for its last monetary policy meeting before the UK general election. However, it is not expected that any changes will be made to either the level of interest rates (which currently stand at ultra low 0.50% levels), or to the asset purchase target (capped at GBP200bn for now). Since the last meeting there have been extremely encouraging upgrades to Q4 GDP along with outstanding retail sales figures for February; however, in line with BoE forecasts, the headline CPI has finally started showing some signs of easing off - to 3.0% YoY in Feb from an alarming 3.5% in the month prior. If inflation continues to follow the path outlined by BoE officials, it is likely to undershoot its target in the coming months, and as such the central bank will be in no rush to begin a tightening cycle until the recovery is more secure. In Europe, analysts are in unanimous agreement that the ECB will keep interest rates at 1.00% this month. Officials are likely to repeat verbatim the language of previous statements that current monetary policy remains appropriate. Trichet has already primed the market that he will reveal new lending rules this time around - a necessary step to ensure Greek debt does not fall outside the ECB's accepted collateral list. However, with the political situation still somewhat fragile, it is likely Trichet will avoid wading into any controversial statements about the Greece bailout plans.
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