Greece hit with selective default downgrade

Morning Comment          

Current mid-market inter-bank spot rates (as at 08:10 GMT) 

Major sterling  

Major US$  

Sterling emigrate  

Other sterling  

Euro crosses 

Data / Events due today 

Fundamental 

Yesterday morning saw a weak 12 month German bond auction take some of the shine of the latest euro rally. However, the approval of the second Greek bailout by German lawmakers once again satisfied risk sentiment allowing the euro to claw back earlier losses. Attention now shifts to tomorrow’s LTRO where the level of take up will grab the headlines. As a gauge, December’s program saw take up of €489bn. 

In response to last week’s decision by Greece to add a collective action clause to the debt swap, Standard and Poor’s cut Greece to selective default. The move was not unexpected and thus far has had little impact. However, Greek credit default spread are widening once more and if we see similar direction in other peripheral European bond markets, contagion will once again be the buzz word. 

German GfK consumer confidence already released this morning was in line with consensus at 6.0, its highest level since October 2007. 

The focus for this morning is on Eurozone confidence indicators. Mild improvement seen in general but nothing significant enough to have any lasting impact. Later we have the latest UK CBI distributive trades survey is expected to improve on last month’s sharp decline although remain in negative territory. This afternoon, US durable goods orders are expected to have fallen in January although excluding the more volatile transportation component, are seen flat. Consumer confidence is expected to improve on January and thus hold towards the upper end of the range of the last four years. 

Tonight, GfK UK consumer confidence is expected to improve to -27 which would be the highest reading in eight months. 

Technical  

£-usd 

Little changed here following yesterday’s consolidation on the 1.58 handle which leaves the focus for bulls on 1.5905/30 and 1.5995/1.6000 while bears will have an eye on 1.5810/1.5775 and 1.5665/45. For now, there is a slight upside bias but the resistance levels are strong and warn against an excessively bullish stance. 

£-eur  

The pound managed to eek out a tiny gain against the euro yesterday but the dent made in the fall from the mid month 1.2080 high has been minimal thus far. At a minimum, we need to see a move back above 1.1880/85 to remove the focus on the 1.1785/00 support zone. Above 1.1885 would allow additional upside towards 1.1920, 1.1955/60, 1.2000/05 then the 1.2080 level again. Support if we head directly below 1.1700 lies at 1.1660 and 1.1595/85. 

Analysis of further currency pairs, forward contract pricing, and information on limit or stop loss orders is available at any time on request.                                          

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