Euro Rallies on Greek Promise

United States (U.S.) publications for employment, manufacturing, and housing sectors have shown that the country’s economy is improving slowly. Data for this week looks sparse with only a few releases expected which include home sales and consumer confidence. Nothing indicates we should expect much change in the overall economic trend. U.S. manufacturing has been leading the recovery with increased production and additional hiring. In addition to this, most industry sectors have shown some employment increases. As a result, gaining jobs have given consumers an increased purchasing ability. Thus, we are seeing greater purchases. For example, automobile sales were higher in January than they had been for three years. Despite these moderate increases, the U.S. has a long way to go to revive the economy back to where it needs to be, pre-recession 2008. For instance, the unemployment rate remains high at 8.3% as the current rates of additional employment have not been substantial enough to lower unemployment levels back to the healthy 5.0%-6.0% levels. To add to this difficulty, most economists are expecting the economy will see less growth in the first quarter of 2012 as consumers will be refilling their savings accounts from holiday reductions.

In other news, Greece received additional mandates for gaining the bailout funds. This included cutting an additional €6 billion from their budget through various means. This could require private investors to take additional cuts on their profits. Greek Finance Minister Evangelos Venizelos commented he expects a deal will occur, "We expect today the long period of uncertainty - which was in the interest of neither the Greek economy nor the euro zone as a whole - to end." The meeting is projected to proceed late into night.

The EURUSD rallied 80 pips higher on hopes from Greece. With a banking holiday in the U.S., the positive comments from Greece were enough to lift the pair higher. If the Greek deal is reached as expected, the EURUSD might trade over 1.3400.                                                                                                          

Eugene Ross, Analyst

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