Euro stayed in tight range against dollar in spite of positive news from Greece. Greece was offered loan extensions of 4 months, compared with its request of 6 months. The debt-ridden country agrees to commit to the current program and the government would "refrain from any rollback of measures and unilateral changes to the policies and structural reforms... as assessed by the institutions". Greece would also provide a first list of reform measures on Monday for review by the institutions. A conclusion would be made by the end of April on the final list of reform measures Greece must adopt. The funds would then be disbursed after the conditions are agreed.
The Greek government appeared thrilled by the result with Finance Minister Yannis Varoufakis saying that Greece has won a victory. Greek PM Tsipras pledged that "we won a battle, but not the war as the difficulties, the real difficulties, not only those related to the discussions and the relationship with our partners, are ahead of us". However, uncertainties remain. Most importantly, to what extent the Greek government would agree to reform is highly uncertain. Moreover, it is unclear how the Greek government would finance itself through the duration of the negotiations. It is also uncertain that under what terms and conditions the ECB would agree to fund the Greek banking system. Some news reports, however, suggested that the central bank allow Greek bank funding to return to the main refinancing operations "once it assesses that the program is likely to be concluded".
In Japan, minutes of BoJ meeting in January showed that three policy makers expressed doubt on hitting the inflation target sue to slowdown in underlying inflation and falling oil prices. Nonetheless, many members noted "despite further slides in oil prices and slowing year-on-year growth in the consumer price index, mid-to longer-term inflation expectations have been steadily maintained." Separately, an adviser to prime minister Shinzo Abe noted that the yen between 117 and 120 "is a comfortable level for Japan's economy". And, "the weak yen should help boost consumer spending eventually as higher corporate profits will filter through to wage growth." Also, he noted there is "no good reason" to have additional easing.
On the data front, German Ifo is the main focus in European and is expected to show general improvement in February. UK will release CBI reported sales. US will release existing home sales. Looking ahead, Fed chair Janet Yellen will testify to Congress on Tuesday and Wednesday. Some analysts noted that the January FOMC minutes were a bit more dovish that expected. And the testimony will be a chance for Yellen to clarify policymakers' views. Yellen would be watched on hints when the term "patient" would be dropped from FOMC statements, and thus, the timing of the first rate hike. Here are some highlights of the week:
- Tuesday: German GDP final; Eurozone CPI final; US S&P house price, consumer confidence, Fed Yellen testimony.
- Wednesday: China HSBC manufacturing PMI; UK BBA mortgage approvals; Fed Yellen testimony, US new home sales
- Thursday: New Zealand trade balance; German unemployment; UK GDP revision; Canada CPI; US durables goods orders, CPI, employment claims.
- Friday: Japan CPI, industrial production, retail sales, household spending; German CPI; Swiss KOF; US GDP revision, pending home sales, Chicago PMI