Euro falls as Germany rejects Greece’s request for a loan extension

Enrique Díaz-Álvarez20/Φεβ/2015Currency Updates


A quiet day’s trading in the UK on Thursday compared to a busy Wednesday. Sterling traded within a narrow band for most of the day to finish 0.1% down versus the Dollar.

No major economic indicators were released in the UK yesterday. The Confederation of British Industry’s industrial trends survey did, however, print higher in February. Of the 522 firms questioned in the survey, 36% expected production to increase in the next three months against just 12% who forecast a decline, while 26% said order books were above average, compared to 16% who were experiencing below normal orders. An uptick in the overall index score from +6 to +10 marked the highest reading since as far back as August last year.

Retail sales data and the historically volatile measure of public sector net borrowing will be out in the UK at 9.30am today.


Thursday was a busy day for the Eurozone economy. Having briefly touched a fortnightly high against the Dollar post-FOMC minutes, the Euro declined by 0.3% against the greenback following developments regarding Greece.

On Thursday morning Greece, as expected, requested a six month extension of its loan agreement with the European Commission and ECB as Greek finance minister Yanis Varoufakis pledged to “honour financial obligations to its creditors”. While this was greeted positively by the Commission’s president, it was almost immediately rejected by Germany who viewed the proposal as unsubstantial and falling short of conditions expected by the Eurozone. Eurogroup members will convene again today in order to hammer out a deal, in what might be a crucial meeting. Germany has left the door open to an agreement, however, if the Greek government is unable to revise its offer before said meeting, an approval for an extension may be difficult to obtain.

Elsewhere, accounts released by the ECB showed that the decision to launch quantitative easing at the January meeting was opposed by some policymakers. A number of members saw no urgent need for action, arguing the tool should be kept in reserve. Yet, the overriding majority saw QE as a means of dragging the economy out of growth-sapping deflation.

In terms of data, consumer confidence continues to climb in the Eurozone. The leading index, as measured by the European Commission, improved markedly for the second consecutive month, rising by 1.8 points to -6.7, its highest reading since October 2007.

Today will see a number of releases from Markit in early morning trading. The flash manufacturing, services and composite PMI’s for the Eurozone will be announced at 9am GMT, and may cause moderate volatility.


The Dollar was boosted back to pre-FOMC levels yesterday due in part to events in the Eurozone, with the US Dollar index 0.3% higher for the day.

More positive signs for the US labour market after the number of Americans filing new claims for unemployment benefits fell last week. Initial jobless claims declined back below three hundred thousand to 283,000 for the week ending 13th February, with the more representative four week moving average down by 6,500 to 283,250. Continuing jobless claims were up to 2.425 million, although this runs on a two week lag.

Elsewhere, the Conference Board’s leading indicator, an index designed to predict the future health of the US economy, experienced its smallest monthly increase since August, climbing by just 0.2% on a monthly basis. Similarly factory activity growth in the mid-Atlantic region of the US disappointed on the downside. The Philadelphia Fed manufacturing survey also printed lower at 5.2 in February, its lowest reading in twelve months.

Just the one data release in the US today as Markit release their manufacturing PMI for February at 2.45pm London time.


Written by Enrique Díaz-Álvarez

Chief Risk Officer at Ebury. Committed to mitigating FX risk through tailored strategies, detailed market insight, and FXFC forecasting for Bloomberg.