Greece agree a 4 month extension of bailout funds

Today's Highlights

Greece agree a 4 month extension of bailout funds

Yellen testimony the focus in the US this week

FX Market Overview

Greece and the Eurogroup managed to cobble together a deal to extend Greece's current bailout programme for the next 4 months which should , in theory , give everyone some breathing space in order to deliver something more permanent. The Greeks have until today to produce a list of reforms to satisfy their creditors to secure their financial lifeline. Although the Greeks are claiming victory it is actually an extraordinary climb down after 4 weeks of brinkmanship. A government that was elected on a promise of an end to the austerity programme has overplayed its hand and weakened their position with the Eurogroup. Markets were largely unmoved by the resolution and perhaps Quantitative Easing and its effects will be the focus going forward. Any rally in the Euro should be limited if the status quo is maintained. Data wise we await the IFO from Germany today and labour data on Thursday. Both are expected to be positive and should provide short term relief for the beleaguered Euro.

Over in the United States Federal Reserve Chair Janet Yellen will testify in front of congress on Tuesday and Wednesday. Last weeks minutes of their recent meeting were clearly dovish however these were delivered before the robust labour data was released. There has been much debate regarding the language used on communicating the Feds message around rate hikes and we are looking for a little clarity from in her testimony. Most analysts expect a rate hike at some point in the second half of the year and if Yellen is consistent in her remarks the dollar should remain in vogue.

Today is pretty light on tier 1 data with only German IFO and UK CBI distributive trades due this morning. In fact economic data is pretty thin this week as events in the Eurozone , the Ukraine and perhaps oil prices will help to give us near term direction. Us inflation is due on Thursday but I suspect that the main driver from a US perspective will be Yellen's testimony over the next couple of days.