USD
The Dollar remained relatively flat yesterday despite fewer Americans than
forecast filed applications for unemployment benefits last week, showing the
labour market is making progress. Employers are holding on to workers amid
gains in household purchases, the biggest part of the economy. The improvement
in the job market, coming off its best year for hiring since 1999, was noted by
Federal Reserve policy makers at their January meeting as they debated when to

USD
The Dollar remained relatively flat yesterday despite fewer Americans than
forecast filed applications for unemployment benefits last week, showing the
labour market is making progress. Employers are holding on to workers amid
gains in household purchases, the biggest part of the economy. The improvement
in the job market, coming off its best year for hiring since 1999, was noted by
Federal Reserve policy makers at their January meeting as they debated when to
begin raising interest rates.

EUR
Germany yesterday rejected a Greek request for a six-month extension to its
Eurozone loan programme. The rejection came despite the European Commission
calling the Greek request “positive” only minutes earlier. Greece had
sought a new six-month assistance package, rather than a renewal of the
existing deal that comes with tough austerity conditions. However, a
German finance ministry spokesman said the new plea was “not a substantial
proposal for a solution”.

The Greek request letter includes a pledge to maintain “fiscal
balance” for a six-month period, while it negotiates with Eurozone
partners over long-term growth and debt reduction. The Greek government was
also reported as saying that its extension proposal was in order to give Athens
enough time, without the threat of “blackmail and time deficits”, to
draw up a new agreement with Europe for growth over the next four years.

The German finance ministry spokesman said the Greek request was an attempt at
“bridge financing, without meeting the requirements of the programme. The
letter does not meet the criteria agreed upon in the Eurogroup on
Monday.” But shortly before the German rejection of the proposal, a
European Commission spokesman said that Commission president Jean-Claude
Juncker regarded the letter as a “positive sign, which, in his assessment,
could pave the way for a reasonable compromise in the interest of the financial
stability in the euro area as a whole”.

The main problem between Greece and Germany is an ideological one: Athens wants
to stop saving and start spending to get out of the crisis. But Berlin believes
that’s exactly what caused the crisis in the first place, and remains convinced
that the only path to long-term economic health is to make Greece more
competitive. To make matters worse Berlin is clearly frustrated by Greece’s
negotiating tactics. 

There is, however, also a lot of sympathy in Germany for the plight of Greek
people. And an awareness of the importance of keeping Greece in the Eurozone.
But increasingly it seems, not at any price. Friday’s vote on the Greek
proposals must be unanimous. If no agreement appears likely before the
ministers gather, the meeting could be postponed.

Key
Announcements:
GBP- 09:30 : UK Retail Sales (Jan) expected to rise to 5.9% from 4.3%

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