Forex Weekly Round Up 16 February 2015 – 20 February 2015

The Italian economy stagnated in the three months through December, failing to rebound from its longest recession on record. Gross domestic product was unchanged from the previous quarter when it dropped 0.1 percent. The median forecast called for a drop of 0.1 percent and from a year earlier, GDP fell 0.3 percent.

The Greek Finance Minister Yanis said the terms of the Eurozone’s demands are unacceptable, however, a bailout carries a long list of austerity measures that Greece is reluctant to adhere to.

British consumer price inflation fell last month to its lowest level since records began in 1989 and looks set to slow further, lifting voters’ disposable incomes as national elections approach. Annual CPI fell to 0.3 percent in January, down from 0.5 percent in December.

The fall largely reflected a slide in oil prices, which last month hit a near six-year low below $45 a barrel, as well as lower food costs. Finance minister George Osborne welcomed the figures, published less than three months before the election, as boosting households’ spending power after years of weak wage growth.

The UK unemployment rate hit 5.7% yesterday, showing the labour market in the UK is healthy. Average earnings, excluding bonuses also rose by 1.7% year-on-year in the last 3 months of 2014. Earnings including bonuses rose at a faster pace, up 2.1%. This is good news for the general public in the UK because the gap between inflation (0.3%) and wage increases is growing. This means that people in the UK have more disposable income in which to spend on goods and services.

Over the pond, the Dollar remained relatively flat yesterday despite fewer Americans than forecast filed applications for unemployment benefits last week, showing the labour market is making progress. Employers are holding on to workers amid gains in household purchases, the biggest part of the economy.

Our prediction for the coming week is continued weakness in the Euro and further weakening in the Dollar before it strengthens again later in the year. The markets are liquid and volatile, however, so we may see movements outside this pattern.