The market continued to be dominated by the imposition of a levy on bank deposits in Cyprus with pressing concern that we could see a domino effect amongst the other countries in the euro zone.
Last night finance ministers in the euro-area kept pressure on Cyprus as they insisted that savers should still yield the €5.8bn towards the bailout but signalled some flexibility in the measures. This could potentially spare deposit holders under €100,000.
Voting on the measures have been postponed until 4pm BST today and there is a strong suggestion that Cypriot President Nicos Anastasiades may not have the full support of lawmakers to pass the levy. Failure to pass the levy would put Cyprus’s bailout into huge doubt and could potentially put the euro under pressure.
The uncertainty of the events in Cyprus has created a risk-off stance in the markets, which could also potentially cause further flows into the US dollar. US dollar investors should also take note of the Federal Reserve’s monetary policy meeting on Wednesday evening.
Figures released this morning have shown that the annualised rate of inflation rose to 2.8% from 2.7%, which may provide relief for the pound following recent reports that the Bank of England may be looking to reduce interest rates.
Data from the ZEW Survey has also showed that economic sentiment in Germany has risen higher than expected to 48.5.
N/A – GBP – BoE Inflation Letter.
12.30pm – USD – Housing Permits (Feb): Expected to stay at 925,000.
16.00pm – EUR – Cypriot Bank Levy Parliamentary Vote.