Euro Advances As Greek Government Pass The Bill

The pound gained against the dollar during the Asian session after Confederation of British Industry (CBI) said the UK will avoid technical recession this year, avoiding the need for more BoE stimulus. The CBI Director John Cridland said that country will start to grow in first quarter of 2012 and they do not believe the central bank will add additional financial stimulus. There are no economic releases or policy speeches scheduled for today. The main event of the week is the Bank of England publication of the February Inflation Report on Wednesday. The additional 50 billion pounds of quantitative easing program announced last Thursday should mean the policy members have stronger projections on GDP and inflation than in November. Consumer price data for January  is published on Thursday, and the expectations for the CPI inflation is to fall back to 3.6% from 4.2% in the previous month. RPI inflation is also expected to fall to 4.1% from 4.8% in December. A CPI outturn of 3.1% or higher will mean that BoE Governor Mervyn King will have to write another letter to the Chancellor explaining why inflation is so high. On Tuesday we also receive RICS Housing Survey, with projections for the prices to have dropped in January. Finally, the ONS publishes retail sales data for January on Friday. Analyst anticipate the headline sales figure to have dropped by 0.3% from previous reading. 

The euro gained across the board during the overnight trade after Greek PM Lucas Papademos won approval from parliament for austerity measures to secure a second package of financial aid. The Greece’s vote on spending cuts puts the spotlight on a meeting of Eurozone finance ministers on February 15 that must decide whether to approve the 130 billion euro rescue package. Looking to the week ahead, growth figures from the Q4 of 2011 are scheduled for Wednesday, with the expectations for the Eurozne GDP to have contracted by 0.4% in last three moths of the year. On Tuesday, the release of industrial production figures for December will give us more insights into the Q4 GDP number, but analysts do not sound extremely positive about the release. However, the glimmer of hope could come from the business confidence surveys, with German ZEW survey predicted to rise by 1.6 points from last month to 30.5 for February. Expect for the euro to remain volatile this week ahead of the Eurozone GDP reading and before EU leaders meet  on Wednesday to decide Greece’s future in the euro region.