US Dollar s till strong ahead of FOMC and GDP

Today's Highlights

Greece set for turmoil; Europe is worried

Sterling strong ahead of GDP data tomorrow

US Dollar s till strong ahead of FOMC and GDP

FX Market Overview

I've just come off the phone after speaking with David Cameron. I obviously told him I was the new Greek Prime Minister just to get past security but he won't mind when he finds out. Aaaanyway, I told him that the Greeks weren't going to put up with any more nonsense from the EU, EC or IMF and that we weren't going to agree to any more debt. I told them we had told Europe to stick their austerity where the sun doesn't shine. David Cameron said he wanted to send the whole EU budget to the same place and he was going to hold a referendum on it. Oh how we laughed.

Back in the real world, the massive success of the Syriza party in Greece has sent shock waves through Europe and chilled financial markets around the world. Greece is such a small part of the overall Eurozone economy but the great fear is that a Greek exit from the euro would set precedents for Spain and others, (Spain has an election later this year) but the greater fear for the rest of the Eurozone is that Greece defaults on its debt, leaves the euro and then prospers. That would shock the Eurozone members who have stuck with the Eurozone program on the basis that 'there is no plan B'. With even the German economy struggling (in spite of the slight improvements in today's IFO indices), a plan b without central control might be very appealing.

Sterling's improvement against the Euro is mirrored in improvements on other exchange rates. The Pound is being buoyed by concern over Europe and elsewhere but also by Britain's strong economic showing in spite of poor results from our trading partners. Gross Domestic Product is forecast to have grown by 2.8% in the Year to December; a very solid result by any measure.

However, Sterling is down Against the US Dollar; as most currencies are. $1.50 is an obvious psychological barrier to further USD gains but it could conceivably give way in the days ahead; especially if the Federal Reserve hint at early interest rate rises when they make their announcement on Wednesday. If they don't do that and Friday's US GDP data is as weak as the forecasters suggest, we ought to see the USD weaken again before the weekend, which is also the end of the month.

This week will also bring European inflation data but that may be overshadowed by the Greek news and we will get an interest rate decision from the South Africa Reserve Bank but no change to their 5.75% base rate is expected.

Aside from these morsels, an advertising board at the roadside in Iowa cause a flurry of calls to the police from people who thought the mannequin on top of the advert was a suicidal person. The mannequin was atop a poster saying, "from here I can see Deery of Burlington". That is a Mazda dealer by the way. Their local billboard campaign has gone viral but I can't see too many people grabbing an international flight to Des Moines County looking for a Mazda.