The Greek debt crisis remained the dominant driving force into currency movements in last week’s session, with speculation surrounding the imminence of a bailout package pushing the euro back and forth all week, and in and out of positions in the safe haven currencies of the Japanese yen and US dollar.

The week concluded with EU leaders led by the German Chancellor, Angela Merkel, announcing that no further talks would be made until Greece can provide evidence of planned spending cuts and a decisive plan of action to take Greece out of recession. Although this should act to draw a line under speculation on the ramifications of defaulting minor economies on that of the major states such as Germany and France, investors are without a concrete plan of how debt-ridden Greece will be relieved. And this could almost ensure the euro maintains its position as speculators whipping boy going into this week’s session.

The US dollar has appreciated over the last few weeks as both a safe haven bet out of the riskier euro and off the back of improved market sentiment. With the Federal Reserve Chief, Ben Bernanke, announcing plans to withdraw extra liquidity, and therefore begin the US exit out of unconventional fiscal measures, markets will be keen this week to see what the FOMC minutes have to say regarding the outlook on the US economic recovery, which is expected to be supported by inflation and output figures.

On this side of the pond the UK spent last week downwardly revising their outlook for the UK economy. The Bank of England’s quarterly inflation report put pressure on the pound as it revealed the institute expected inflation to remain low in the long term after an initial short term spike and growth estimates were lowered. Similarly, the release this week of BoE minutes from their last meeting could act to further weigh on sterling bogged down with a renewed wave of negative sentiment.

Markets open quietly today with the US closed for the President Day public holiday, leading to thin liquidity and therefore the increased risk of greater volatility. The UK sees a muted start to the week with no data up for release but looks forward to CPI and RPI numbers tomorrow. Meanwhile the Euro Zone fares little better with trade figures from Italy the only market data due.