Sterling gains against dollar on Greek hopes

Pound:
Sterling rose against the dollar on Friday, trading within sight of a five-week high as speculation that a Greek debt swap deal would be reached this week and slightly weaker-than-expected U.S. GDP data weighed on the greenback. Sterling has however reversed some of those gains this morning to trade around 1.5660. Market talk of an expected deal between Greece and its private creditors that would avoid a messy default helped push the euro higher against the pound, tracking a rise in euro/dollar. Sterling was last up 0.1 percent on the day at $1.5699, having earlier hit a session high of $1.5730. Sterling has been unable to take full advantage of euro zone troubles due to expectations the Bank of England will need to increase its asset purchase programme as early as next month to support the UK's flagging economy. Those concerns were heightened after data on Wednesday showed the UK economy contracted by 0.2 percent in the fourth quarter of 2011, putting it on the brink of recession. Market players are now looking ahead to this week's PMI data, which will indicate the health of the manufacturing, construction and services sectors.
 No major data due today.

Euro:
Greece and its private creditors said they expect to complete a debt-swap accord in this week, after bondholders signaled they would accept European government demands for lower interest rates. The sides are "close" to completing a voluntary exchange within a framework outlined by Luxembourg Prime Minister Jean- Claude Juncker, the Institute of International Finance, negotiating on behalf of private creditors, said in an e-mailed statement in Athens on Saturday. Creditors are prepared to accept an average coupon of as low as 3.6 percent on new 30-year bonds, said a person familiar with the talks, who declined to be identified because a final deal hasn't been struck yet. An accord with bondholders is tied to a 130 billion-euro, second bailout from Greece's European partners and the International Monetary Fund for the country, which faces a 14.5 billion-euro bond payment March 20.
EU Economic Summit all day.

Dollar:
Last week's announcement by the Fed that US interest rates would likely remain at their current, near-zero levels until 2014 sent the USD tumbling against virtually all of its main currency rivals. The announcement was followed up by a worse than expected US Advance GDP figure, which added to the gloomy outlook investors have regarding the US economic recovery. The dollar closed out the week above the 1.3200 level against the euro, while it gave back virtually all of the gains made against the yen several days before. The dollar does however have a chance to reverse some of last week's losses, with a series of data scheduled to be released this week. The most significant of these is Non-Farm Employment Change, which is due out on Friday.
No major data due today.

General:
•    The Australian and New Zealand dollars weakened before European Union leaders meet to discuss the region’s debt crisis at a summit in Brussels today. The Aussie slid versus all of its 16 major counterparts amid concern Italy’s funding costs will surge at an auction today after Fitch Ratings cut the nation’s credit grade last week. New Zealand’s currency halted its longest advance in 10 months as Asian stocks fell, extending a global slump in shares.

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