No candies this time

Hopes were not elevated but even those who hoped for a knee-jerk rebound following the Merkel-Sarkozy mini-summit were disappointed. The main theme of the meeting was a tax on financial transaction – an issue that the PM Cameron (this one time) can be right: may work but on the global basis. At that point in time it seems to be merely a puzzle in the presidential campaign in France.

Meanwhile, not much has been said about crucial issues that is detail of the fiscal compact which is still in the phase of the concept (at least officially, but should some serious clerk work be under way there would be certainly some leakages of the details) and the promise of presenting something on March the 1^st does not look good at all – how the duo sees Italy and Spain placing some 100 bln on debt (combined) until that point is unclear.

What is more, there might be more of the bad news in the pipeline. The fact that Angela Merkel presses Greece just before the mission of the Trojka (coming back to Greece next Monday) might suggest that things are not going as planned and confirm rumors that the IMF does not believe that Greece will return to the path of growth and to the markets under current circumstances.

When it comes to the EURUSD, the pair is no longer offering a substantial downward potential against the fundamentals but has not overshot either and on financial markets it is very well possible. One thing to notice here is the negative spread between FRA12x15 and FRA9x12 suggesting that some might be warming up to the idea of a) lower rates in the zone b) those lower rates staying with us for longer.

Przemysław Kwiecień PhD, Chief Economist

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