Forex Weekly Round Up 9 February 2015 – 13 February 2015

The British trade deficit widened sharply in December 2014 on a surge in oil imports making the trade gap for last year the largest since 2010. The coalition government’s efforts to increase the number of businesses exporting have been frustrated by consistent weakness in the euro-zone; Britain’s largest export market.

George Osborne warned that the risks of a very bad outcome from the ongoing Greek debt crisis has risen. Speaking to Bloomberg TV he said there is a growing danger that the deadlock over Greece’s bailout programme spirals out of control, stating that it could potentially cause serious damage to both the European economy and the UK economy.

The British economy grew by 2.6 percent in 2014, the fastest growth rate of any big advanced economy. However, it lost pace towards the end of the year, including in the manufacturing sector, which is exposed to weakening demand in the euro zone.

The Bank of England said it expects stronger growth on the back of lower oil prices but that there is little need to raise interest rates this year and could even cut them if inflation proves weaker than expected.

Employers in the U.S. added more jobs than forecast in January, capping the biggest three-month gain in 17 years. The 257,000 advance in payrolls last month followed a 329,000 gain in December that was bigger than previously reported, figures from the Labour Department showed Friday in Washington.

Greece dominated the news this week. Sources suggest Greece will ask for a longer bridging loan, until September, and also propose new measures to replace what they consider the unacceptable parts of the existing bailout. There is no suggestion that European leaders will back the proposal.

Rating agency Moody’s cut the credit rating on five major Greek banks, as fears over the country’s future in the euro-zone continue to swirl. The Athens market fell 6%, as bank shares suffer new double-digit falls.

Greek Finance Minister Yanis Varoufakis presented his European counterparts with four principles for a new financing deal. Greece wants a deal that provides for financial stability, financial sustainability and debt restructuring, while addressing Greece’s humanitarian crisis.

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 adverse movements as well.