Article by ForexTime
The headline reading says it all to be honest. Talks between the Greek Finance Minister Yanis Varoufakis and German Finance Minister Wolfgang Schaeuble do not appear to have gone smoothly with the press conference currently taking place pointing towards negotiations over the Greece bailout deal going down to the final wire. It was expected that the German Finance Minister would have a tough stance on the Greek debt situation and following the meeting taking place today, it doesn’t appear that uncertainty will be erased anytime soon over whether Greece will reach an agreement on its bailout programme with the rest of Europe.
The Bank of England (BoE) interest rate decision turned out to be a non-event with there being no surprises whatsoever that the central bank left interest rates unchanged this month. The GBPUSD has managed to climb to a two-week high at 1.5281 with the pair continuing to advance following a hat-trick of PMIs this week (Construction, Manufacturing and Services) coming in higher than expected, while also indicating that UK economic momentum has started the year strongly. The pair still needs to cleanly extend, and conclude above 1.5300 to confirm a return back to the 1.53 region for the first time in a month. This also likely means that USD weakness will be required following the US NFP reaction tomorrow.
Looking ahead to next week, the GBP will face a major downside risk when the Bank of England (BoE) inflation report is released on Wednesday. It is no hidden secret to anyone that the BoE contain extremely strong views on UK inflation, with the recent unexpected deflation risks following the collapse in the price of oil even leading to the two dissenting members of the MPC switching their votes against an UK interest rate rise. The UK inflation data last month was announced at a historic-low at 0.5% and with the price of oil having continued to make new lows in the month of January, the chances are high that the UK inflation reading could be even worse in February.
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