·         3^rd austerity package in 3 months

·         Rises in VAT, excise, cuts in public sector pay

·         Germany will NOT help

·         BOE and ECB to hold rates today

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Greece was definitely the word yesterday as markets reacted to their new austerity package by sending equity markets and the euro higher.

Tough decisions have been made in the Hellenic Republic; cuts in pension contributions, higher VAT and excise rates and a 30% slash of public sector bonuses. They, as PM Papandreou said last night, have lived up to their side of the bargain, it’s now time for Europe to help out. They won’t however get any love from everyone as Angela Merkel confirmed that no help would be forthcoming from Germany in a meeting scheduled for tomorrow. Commentators put this down to fears over German sovereign debt risk should they be forced to act as guarantors on newly issued Greek debt. According to one cabinet minister, the Greeks will go to the IMF if needs be; whether Papandreou will meet with the IMF on his trip to Washington next week remains to be seen.

In the meantime this news is acting as a booster for the euro and has pushed the single currency to the highs of its recent ranges (1.37 for EURUSD and 1.10 in GBPEUR terms). There is risk today for the euro in the form EU GDP at 10.00 and the ECB’s press conference at 13.30; I do not see the euro advancing too much before tomorrow’s EU wide meeting however.

Sterling was bucked up yesterday by the PMI figure for the services sector. 58.6% of respondents reported that business conditions have improved since the previous month compared to last month’s figure of around 55%. While this is good news and good news from the largest sector in the UK it is unlikely to trigger a massive sterling uptick.

We obviously have the Bank of England announcement today, and I doubt it will be a massive market mover. I think we will see that they have left the door open to further QE when we get a chance to look at the minutes in 2 weeks time but other than that it will be a continuation of what was expressed in February’s inflation report.

Apart from the releases already mentioned, we have initial jobless claims from the US at 13.30 alongside pending home sales and factory orders at 15.00

Should you wish to join in on our webinar on the prospects for sterling for the month ahead and don’t already have an invitation feel free to email research@worldfirst.com