In Europe, uncertainty as related to Greece remains intact as the current aid agreement expires at the end of this month and as officials failed to agree on a solution as part of yesterday’s Eurogroup meeting.
According to Greece’s Finance Minister Varoufakius they are willing to extend the current aid program as long as it’s done on the right terms. Prime Minister Tsipras stressed, that they are ready and willing to do whatever it takes to reach an honourable agreement over the next two days.
We remain of the view that EUR upside risk is limited even in the case of an agreement.
The GBP has been well supported of late, mainly on the back of rising BoE interest rate expectations. This is especially true as central bank members such as Weale have recently stressed that interest rates may rise sooner than currently expected. We expect incoming growth data to make a case for further rising monetary policy expectations to the benefit of GBP.
Today’s focus will be January CPI. As the central bank already stressed that inflation may continue to fall in the short term, any weaker-than-expected outcome is unlikely to have any major currency impact. It must be noted too that this week’s main focus will be labour data and retail sales, which are likely to confirm firm domestic conditions.
Accordingly, we expect GBP dips to remain a buy, for instance against the EUR.
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