The U.S. dollar is trading higher against all of the major currencies this morning but its strength has more to do with the latest troubles in Greece than Friday's better than expected jobs number. Unfortunately for the EUR/USD, which is sharply lower today, another weekend has passed with no PSI deal. With less than a week to go before their self imposed February 13th deadline to submit a final debt swap offer to private sector bondholders, Greece is running out of time quickly. Greece needs to receive their next tranche of aid by March 20th to avoid default, but this doesn't mean they have until March 20th to reach a deal. A number of additional steps need to be taken before the bailout funds can be released once a PSI deal is announced. For example, the Trioka needs to approve the deal and submit a report that determines whether Greece is eligible for a second bailout. Then Eurozone Finance Ministers have to hold their own meeting to approve the final bailout package.
The central problem for Greece is that they refuses to adopt additional austerity measures, arguing that it would plunge the country deeper into recession. Her creditors on the other hand refuse to budge on terms that would unlock funds that the country desperately needs to prevent a default. With the clock ticking and their backs against the wall, the main question now is when Greece will finally buckle under pressure. Greek political leaders were suppose to meet today to discuss additional reforms but the meeting has been postponed to Tuesday. Investors are getting tired of waiting on Greece and they are taking it out of the euro, which fell to its lowest level against the U.S. dollar in more than a week.
It is a busy week for Europe, China and Australia but a relatively light one in the U.S. No major U.S. economic reports were released this morning but Fed President Bullard discussed Inflation Targeting in Chicago. The St. Louis Fed President said a 2 percent inflation target would serve the nation well and is an important step forward in preventing the mistakes of the 1970s. Although it is clear that he supports the Fed's latest transparency measures, Bullard is not a voting member of the FOMC. Up North, manufacturing activity in Canada grew at a faster pace last month. The IVEY PMI index rose to 64.1 from 63.5, the strongest reading since May of last year. Unfortunately the details of the report showed widespread weakness with nearly all of the subcomponents from employment, inventory, supplier delivery and prices growing at a slower pace last month. At first glance, the IVEY PMI report painted a bright picture for the Canadian economy but the headline number masked underlying weakness.
There are no comments yet