No breakthrough for the euro
- Investors remain suspicious
- Sterling/euro on the cusp
Good morning. Researchers have discovered that 54% of new parents choose a name for their little cherub which they come to regret (Robin Banks, Terry Bull). A surprisingly modest 22% had their first preference vetoed by their partner, although only last week Mrs Papademos refused to allow their baby daughter to be called Angela.
But Frau Merkel will have the last laugh. The terms of the bailout deal announced yesterday, which involve a permanent team of inspectors in Athens and external control of the country's cash, make Greece a wholly-owned subsidiary of Germany in all but name. Yes, an exaggeration perhaps, but the EU has gone out of its way to gain control of Greece's finances. There will no longer be an unelected man in charge of the country; it will be a bunch of foreigners approved by Berlin.
It became clear yesterday that investors are more than a little dubious about the plan. They fail to see how the Greek economy will miraculously swing back into growth next year as the reforms cut ever deeper. They snigger at the precision of the requirement to reduce the national debt to 120.5% of gross domestic product in the next eight years. And they are suspicious that the deal will die a rapid death following the April elections.
They did not punish the euro for their fears but they showed no sign of rewarding it for Euroland leaders' efforts. It slipped a couple of dozen ticks lower against the US dollar and went up by a similar amount against the Japanese yen. Against the Swiss franc it was steady as London opened today.
Sterling is more or less unchanged from yesterday morning against the antipodean dollars and the yen. All it had to cope with on Tuesday (other than the fallout from Athens) was a helpful £10.7bn net repayment of UK public sector debt and a neutrally-toned speech by the Bank of England's Charlie Bean.
Other data yesterday showed Canadian retail sales falling by -0.2% in December and eurozone consumer confidence improving slightly from -20.7 to -20.2. Overnight announcements in Australia, that two leading economic indices had swung from negative to positive, were offset by the surprise resignation of foreign minister Kevin Rudd. One Chinese manufacturing sector purchasing managers' index improved by a point to 49.7.
There are more of those on the way from Euroland, with provisional manufacturing and services PMIs due out this morning. They are followed by eurozone industrial new orders, which will probably have fallen in the year to December. North America has nothing to offer other than US existing home sales.
The minutes of the Bank of England's Monetary Policy Committee at half past nine are unlikely to shine any fresh light on interest rates, asset purchases or the pound. Of greater importance is the proximity of sterling/euro to the lower edge of the channel that has supported it since the turn of the year. A rebound is the most likely outcome but a downward break could lead to a further three-cent decline.