Another day, another dead end for Greece as a resolution looks like it will never happen. With the Troika’s plans on the table, the question of what to do to resolve the crisis seems to be taking a political stance than what the correct course of action should be. With impending qelections, Samaras’ New Democracy is looking for an April election whilst the previous premier’s PASOK party wants more time to allow reforms to take place and have the desired effect. Amongst this political backdrop, social and union unrest are never far away and Greece’s two largest unions have protests scheduled for today. All of this is clearly unwelcomed by the market who have effectively priced a lack of resolution in to the markets in the short term. Long term implications however are somewhat different. With the Greek recession moving in to its fifth year, disorderly default on its €14.4bn bond payment imminent and no credible resolution in sight, the macroeconomic consequences will be severe, not only to the Euro zone and it’s currency, but the wider global economy.

Australia took the markets by surprise by leaving their benchmark interest rate on hold at 4.25% overnight. A 25bp cut was expected following the November and December cuts to help whether the implication of the Euro zone crisis but confidence stemming from China and America’s ability to deal with the storm was enough of a reason not to cut at this juncture as it was felt that commodity demand from the regions would be sufficient to stimulate growth. This pushed the AUD to its highest level in 6 months against its US counterpart and has also helped with risk trades this morning, keeping EUR propped above 1.3100.

Attention today will focus on German industrial production and unsurprisingly the bond auctions. Today, it’s the turn of the Netherlands, the UK and Greece who look to sell 5bn Euros, 4bn Pounds and 625m Euros respectively.

Chart of the day: EURGBP Daily   It can be argued that GBP has somewhat underperformed against the EUR of late and failed to fully capitalise against its weakness. This could be due to market perception waning that we’re an appropriate haven for flows as our own domestic economy struggles to cope against the European fallout. EURGBP has pivoted 0.8300 recently and seems to have settled back in to its trend channel. With the BoE announcement on the horizon, I’ll be looking for clearer directional bias.

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