CPI inflation data and ongoing Greek talks to dominate busy session

Its likely to be an incredibly busy day for the major markets today as a whole host of economic data is due for release. The CPI inflation reading from both the UK and the US will give investors and insight into the global inflation picture. Both the Bank of England and the Fed have said that they want to see signs that inflation will start to turn around and be heading towards the inflation target of 2% before any rate hikes are made. So with that in mind any movement away from expectations today is likely to cause some big moves in the US dollar and major equity markets. The data would be enough to make today’s session a busy and pivotal one, however add to the equation the ongoing discussions between Germany and Greece and we could be set for some fireworks.

The inflation number is the key one today as we now have the situation where any good numbers will point to a potential hike, and anything weaker will point to a dovish stance. The problem is the moves will be hugely exaggerated. Its a difficult play over the next week or so. The markets are incredibly nervous about the US dollar and the strength in equity markets, and the moves in both look like they could very easily start to unwind at the smallest bit of market data. With the entire world looking towards the inflationary situation today’s reading from the US is likely to cause a bit of a stir. Janet Yellen wants to see the CPI reading show signs that it can return close to the 2% benchmark in the near term, sentiments echoed by George Osborne and Mark Carney in the UK. Expectations are for the US number to remain in deflation, although we are talking very small margins as we expect the number in at -0.1%. Anything that sees that number jump back into positive territory may well see investors again look at this as a hint towards earlier rate hikes, and see yet more pressure on the US dollar. Do we actually expect this months CPI number to decide monetary policy? The answer is no of course not, but that does not stop a near jerk response from the markets that are dominated by when the Fed will hike.

Greece and Germany are yet again locked in discussions over the restructuring of Greece’s debt payments. Chancellor Angela Merkel and Greek Prime Minister Alexis Tsipras held a joint press conference yesterday but were both vague on the progress of the talks. Both of the leaders, who have been at loggerheads over just how a new deal for Greece would work told the waiting press that they both wanted a strong and prosperous Greece and how important it was to the both of them. However they stopped short of announcing any real progress, mainly because they may not be any real progress.

Within the statements from both there did seem tension still, with Angela Merkel looking frustrated and Mr Tsipras’ mention of war reparations. She then eluded to the fact that she expects Greece to keep their side of the bargain and to carry out what they promised in terms of structural and financial reforms in order to pay back its debt. It was yet again a time where the Eurozone met for talks, everybody sat down but got up at the end of the day with no decisions made or any closer to a deal to stop a Greek default. If history tells us anything it is that this is not a short process, and if we do happen to approach the deadline without a deal being made, then simply the deadline will be extended.

Ahead of the open we expect to see the FTSE100 open lower by 13 points with the German DAX open lower by 25 points.