Yesterday’s austerity vote was passed as expected by Greek lawmakers; however at this stage the passing of the vote by the parliament is now pretty much beside the point.

The level of public anger demonstrated in Athens over the weekend suggests that implementation risk is going to be a real problem going forward. In passing the bill though Greek politicians have effectively thrown the ball back into the court of Eurogroup finance ministers, who are due to meet on Wednesday, where they will have to either ratify the agreement, or reject it as insufficient, and demand more austerity measures.

Recent scepticism amongst EU policymakers about the ability of Greece to implement budget savings has manifested itself in a much firmer line from Germany in particular, with finance minister Schaueble arguing that they implement measures from the first bailout program as well.

This firmer line will now be put to the test on Wednesday, with pressure now on EU ministers to approve the package and release at least some of the money, from the new bailout or face the prospect of an imminent Greece default.

With a bond redemption payment due on March 20th today is also the deadline for the PSI to be finally ratified and agreed so that all the necessary paperwork can be in place to prevent a default.

Even so yesterday’s call by New Democracy leader Samaras for elections in April after the PSI is approved will throw into doubt any pledge leaders make now to sign an undertaking to implement the reforms, especially if those same signatories are voted out of power in any new election.

Elsewhere in Europe ratings agency Standard and Poor’s followed its recent downgrade of Italy’s rating by downgrading 34 Italian banks on Friday ahead of an important Italian BTP auction tomorrow.

The Japanese economy contracted by 2.3% on an annualised basis in the fourth quarter as the country continued to suffer in the wake of last year’s earthquake as well as on the back of the Thai floods and the global economic slowdown. The strength of the yen continue to hurt Japanese exports and Tuesday’s Bank of Japan rate meeting could well see further measures to stimulate the economy.

This week is also likely to be a key week for sterling given that the latest Bank of England inflation report is due on Wednesday, while the latest CPI numbers for January, due tomorrow, will also be closely scrutinised for a significant fall in price inflation, given last week’s rather controversial announcement of another £50bn of asset purchases. The MPC will be hoping for a significant drop in prices to justify last week’s extra monetary injection.

EURUSD – the single currency continues to find support at higher levels with trend line support at 1.3140 from the 1.2620 lows in January.
The key level on the upside still remains at the 1.3340 area which is the 100 day MA, while behind that there is also the 1.3435 area which is the 50% retracement area of the same move.
It now needs a move back below the 1.3140 area to retarget the twin lows this week at 1.3025/30 area.
Only below 1.3020 retargets 1.2870/80.

GBPUSD – despite the resistance at the 200 day MA at 1.5938, dips lower continue to be well sought after with the 1.5710/30 acting as a significant layer of support. A move below 1.5700 targets 1.5600 and the 55 day SMA.
Only a close above 1.5940 would signal further gains towards 1.6000.

EURGBP – the 0.8340 level continues to act as support while remaining capped just above the 0.8400 level. The key level remains at the recent range highs so far this year at the 0.8420/30 area. A break could well see 0.8500 quite quickly.
The 0.8340 area needs to break on the downside to signal a return towards the January lows at 0.8220. It would require a break below the September 2010 lows at 0.8200/05, to target the 2010 lows at 0.8065.

USDJPY – just as quickly as 10 year US yields pushed above the 2% level they fell below them again and as a result last week’s late momentum lost ground. The 200 day MA at 78.10, remains the key barrier to a US dollar turnaround towards 80.00 after last month’s failure at that level.
The key support remains above the 76.50 level and expect to see further range trading in the absence of a break above the 200 day MA.