World First Morning Update	  
Greece is (still) the word
"	Negotiations ongoing on bailouts, austerity and PSI
"	US job numbers see unemployment fall to 3yr low
"	UK service sector kicks on in January
"	Data calendar quiet in Europe although Greece is the focus



Please click here to see the video or read more on our blog.

Meetings between Greek politicians continued over the weekend but no signs of an agreement have been forthcoming. The IMF/EU/ECB troika has asked Greece to come up with further austerity measures by 10am GMT this morning so as to receive the new EUR130bn bailout package that should see the Greeks not default on March 20th. Or at least, not default in a disorderly fashion. The agreement on how much of a haircut the private sector will receive has been pushed away, it seems, as the ECB is not willing to take losses on its holdings and the investors, and a fair few Greeks, want them to. 

The euro has slipped somewhat in overnight Asian trade although market conditions have been very thin. GBPEUR hit a high of 1.2084 before falling back to 1.2058 while EURUSD got as low as 1.3053 and now finds itself 30pips higher.

Asian equity markets have crept higher overnight however and that slight "risk-on" mentality has made sure that the euro's losses have not been so bad. Most of the encouragement came from Friday's superb jobs numbers out of the US that saw 243,000 jobs added in the month of January. The unemployment rate also fell to 8.3%, the lowest in 3 years, and now lower than that of the UK. This will add fuel to the fire that stimulus and not austerity is the way to go.

The US jobs figures were not the only upside data surprise of the day. UK services PMI shot higher to 56.0, against an estimated reading of 53.3. This was definitely unexpected good news (nobody predicted it would get that high) and will eliminate most fears that a double-dip recession is on the cards. 

I do not believe that this changes the MPC's view on further quantitative easing, however, and expect the Bank to add £75bn on Thursday. When the latest pump of cash was injected last October the committee emphasised that it was more as a result of European headwinds than problems with the UK that caused the decision. Now, while a Lehman Brothers type event has been averted courtesy of the ECB's new lending operation, recession and diminished confidence cannot be spirited away and herein lies the problem. Recession will come to Europe and, as a result, pressure on the UK economy must be alleviated sooner rather than later.

For instant reaction to Thursday's Bank of England and European Central Bank announcements you can join our webinar on Thursday at 2pm. It is free and we will be looking at what sterling's prospects are for further gains in the coming months. You can register here

Greece's travails will be the focus for markets today with unions planning a 24hr strike tomorrow in protest of pay and pensions reform. That being said we anticipate that GBPEUR and GBPUSD will remain range-bound today.

P.S. Save for some dodgy reffing in the Ireland/Wales game we would have had 3 from 3 in our 6 nations predictions. It is a shame that may be the only England win of the campaign!

In an economy not so far away: The currency wars continue…

The video and more is available on our blog at http://www.worldfirst.com/blog. 

As the Bank of England prepares to launch another load of money into the markets by increasing the size of its asset purchase program by anywhere between £50-75bn we must once again look at how other central banks are trying to weaken their currencies. 12 months ago politicians of every stripe were "banging the drum" of the manufacturing industry but growth has remained subdued. There has been a broad divergence in the data as well with last week's manufacturing PMI suggesting an uptick in orders and output while the latest survey from the CBI suggests the opposite. A weakened currency will, of course, offer a helping hand.

2 weeks ago the Fed announced its attention to keep rates "ultra-low" and "accommodative" through until 2014. We have seen an increase in the prospects of the US economy in the past few months from a good run of data and this precludes us from predicting a new round of quantitative easing in the US, however, a weak dollar is almost assured. With low rates seemingly guaranteed this reinforces that, should we see a protracted period of global recovery, the US dollar will remain the "funding" currency of choice for traders looking for carry returns. 

Similarly the Japanese have come in for criticism in the past few months for intervening in currency markets to reduce the value of the yen. For a country so dependent on exports the yen moving to its strongest level in history versus both the US dollar and euro has been a nightmare. Profit warnings have been forthcoming from Toyota, Sharp and Sony, and of course some of this will be as a result of last year's tsunami, but the political pressure to rein in the yen must be spectacular. Traders expect the authorities to intervene if USDJPY trades close to 75.0; 2% from market at the time of asking. 

And we can't of course forget the Swiss. While there is a little confusion surrounding the stalwartness of the SNB's floor policy since the resignation of Philipp Hildebrand, the latest communiques from the government suggest that floor will stay policy. A statement on Friday stated that the floor "was necessary and at an absolute minimum"; expectations are that this floor will rise from 1.20 to 1.30 in EURCHF over the year as the Franc's continued strength hurts the Swiss economy. 

Other central banks that actively weaken their currencies include China, Korea, Singapore, Brazil and Russia so it is difficult for UK exporters to battle on price if the currency is soaring. The Bank of England is in a position to help; it just depends on how much.

Trade of the Week

This week's trade of the week is a Double Leveraged Step with the client feeling that GBPUSD is fairly range bound and believes that upside above 1.60 is limited. He wanted to have the option of outperforming market versus a forward for the next 6 months. He buys dollars and sells sterling

The client was able to achieve a strike rate of 1.57 on his option which allows the client to benefit all the way up to a rate of 1.65. Should the rate touch the barrier level during the window period (1 month before the expiry date) then that month's structure reverts to a forward at 1.60 (stepped up from the normal 1.57) in twice the amount needed. i.e.  if you originally hedged a monthly exposure of USD200k then you would need to buy USD400k. If the barrier is not touched then he can of course trade in the spot market. If the market moves below 1.57 then he is completely protected.

This strategy requires no premium, and gives the ability to outperform the forward price.  As sterling has remained range bound for a fair time this structure allows you to gain upside should prices gain in the direction we believe they will move whilst allowing you to outperform forward in the interim.

Have a great week