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Inflation data to dominate today’s action

  • CNY – CPI y/y:  2.5%
  • EUR – EU Economic Forecasts
  • CNY – PPI y/y: 6.9%

Please can we have some more?  After receiving two bailout packages from the troika (ECB, EU and IMF) already, Greece are needing a third and around €7bn.  Greek PM Alexis Tsipras is asking for a further bailout package as major repayments are due later this year, with the first debt repayment due to its creditors in July.  The IMF are taking the stance that Greece will not grow out of the debt problem and therefore are not willing to agree to providing additional funds. 

Although not critical just yet, it is felt that an agreement is needed quickly as the political background of the European Union could change, with French, German and possibly Italian elections this year.  To tie in with this, Greece have not confirmed to the reforms asked of them after receiving the previous two bailout packages. The fundamental question that needs to be addressed is whether Greece should receive further funds in their current situation, with repayment looking very unlikely.

  • GBP – CPI y/y:  1.8%
  • USD – Fed Chair Yellen Testifies
  • USD – PPI m/m: 0.6%

Price action was relatively limited yesterday as we started the week with an extremely light economic docket. GBPUSD continued to trade around a key psychological level whilst GBPEUR edged lower throughout the day. Economists’ remain reserved and skeptical ahead of two key pieces of inflation data released from the UK and the US today.

In other news, The European Commission reduced its forecast for Eurozone growth to 1.6%. Inflation was also revised to 1.7% for 2017. The commission said that the Eurozone’s economic recovery is “assailed by risks”, citing a lack of policy clarity from the new US administration and the UK leaving the EU as major risks of the year for the single currency union.

UK inflation is anticipated to show another jump up and is expected to hit 1.9%, just under the BoE’s target of 2%. If recent data releases from Britain are an indication, the CPI gauge could be well above their target, which could mean volatility for Sterling.  Shortly after, the second reading of Q4 GDP from the Eurozone will be released and is due to be the same as the previous reading of 0.5%. In the US, in the afternoon, the focus will be on Fed Chair Janet Yellen, who will be speaking before the Senate Banking Committee in Washington.  As always, markets will look to decipher her remarks for clues as to the next action the Fed may take and when.