Nervous EUR/USD Traders Await Greece Debt Decision

The EUR/USD is trading lower on Friday.  The bearishness is being created by the tension over Greece’s bailout negotiations with Euro Zone finance ministers. Some of the earlier losses have been pared because of growing optimism of a Greece debt resolution. An announcement is expected some time today on a Greece loan extension. Yesterday’s initial proposal was rejected by Germany, but today, investors appear to feel like Greece and its Euro Zone finance minister counterparts are closer to ending the uncertainty.

The GBP/USD continued to weaken on Friday as the Greece situation also weighed on investor demand because of the relationship between the U.K. economy and the Euro Zone. The British Pound is expected to finish the week on a low note against the U.S. Dollar after reaching a new high for the year just a few days ago.

Although traders were paring positions during the Greece negotiations, the primary reason for the selling pressure was a report earlier in the week which showed that the Bank of England’s Monetary Policy Committee voted unanimously to leave interest rates and current stimulus levels unchanged. The unanimous vote likely signals that the BOE has taken the possibility of an interest rate hike off the table for 2015.

April Crude Oil futures are trading relatively flat, but are expected to finish the week lower. For a third time, aggressive buyers failed to create enough upside momentum to trigger an upside breakout.

The catalyst behind the selling pressure late in the week was the bearish inventory report from the American Petroleum Institute on Wednesday, February 20. The API data showed that U.S. crude stocks rose by 14.3 million barrels last week. On Thursday, the U.S. Energy Information Administration said that crude oil inventories rose by 7.7 million barrels. Early estimates were for an increase of just 3.2 million barrels.

Today, traders are waiting for more information about the Greece bailout extension, but more importantly new information about the number of U.S. producing rigs that have been put out of service.

April Comex Gold is also trading flat-to-lower, setting up the possibility of a volatile reaction to any news about a deal between Greece and its Euro Zone creditors.

Today was a light news day for the U.S. but traders had a chance to react to fresh economic data from the Euro Zone and U.K.

German PPI fell -0.6% and German Flash Manufacturing PMI was reported at 50.9. Both reports fell short of expectations. Euro Zone Flash Manufacturing PMI was also below the estimate. The actual was 51.1. The estimate was 51.6.

In the U.K., retail sales came out weaker than expected. Traders were pricing in a reading of -0.1%. The report showed an actual decline of 0.3%. U.S. Flash Manufacturing PMI beat expectations with a reading of 54.3.

Later today, expect short-covering rally in the EUR/USD and GBP/USD if Greece strikes a deal to extend its bailout. Forex and commodity markets could weaken into the close if the talks end with no resolution although they are likely to continue over the week-end.