Highlights of the week ended February 20

Source: Dukascopy Bank SA
Euro zone
A slew of positive fundamentals came out last week from the Euro zone's number economy, Germany. The German economy managed to move further away from recession territory, receiving a boost from domestic spending and exports. Germany's GDP expanded 0.7%, with private consumption rising 0.8%, contributing 0.5 percentage points to economic growth in Q4, and exports surging 1.3%, adding 0.2 percentage points. The jobless rate fell to two-decade low in February. The number of jobless people declined by 20,000 to 2.812 million, the level last seen in December 1991. The unemployment rate was at a record low of 6.5% for a third straight month in February and remains the lowest since German reunification in 1990. As a result, confidence among German consumers hit the highest level since late 2001.  
Meanwhile, an agreement between Athens and its European colleagues significantly lowered the chances of Grexit. The European Commission admitted that a list of economic reforms submitted by Athens "is sufficiently comprehensive to be a valid starting point". The Greek government presented its plan on how to overhaul the nation's economy on Tuesday. The new Greek government pledged to take a disciplined approach to budgets, spending and tax collection. Also, Greece's Finance Minister Yanis Varoufakis sees the country returning to the financial markets as soon as it succeeds in debt restructuring, investment and sustains primary budget surpluses. Greece has been excluded from international financial markets since 2010, with the exception of two bond issues in 2014 made by Antonis Samaras' government. Also, Athens is expected to receive its third rescue package worth 20 billion euros this summer.

US
During the two-day testimony, Janet Yellen, the Fed Chairwoman, told Congress that policy makers are satisfied with recent economic growth but believed there is room for improvement, thus still pondered when to begin lifting interest rates. Yet, Yellen stressed that a rate hike is not likely for at least next couple of FOMC meetings, but said that the policy-setting committee is considering interest rate increases "on a meeting-by-meeting basis". Moreover, Yellen highlighted that the persistence of subdued inflation might still postpone the timing of the lift-off. However, Yellen said that the Fed could still hike interest rates before inflation rises as long as the central bank sees price growth accelerating and the labour market continues to improve.
Meanwhile, the annual inflation rate in the world's number one economy turned negative in January for the first time since 2009. The US consumer price index dropped 0.1% in the reported month from a year earlier. However, core inflation, which strips out energy and food costs, stayed positive at 1.6% on an annual basis, but below the Fed's 2% goal.

UK
Mark Carney, BoE Governor, also said low inflation is temporary and will return to the 2% goal within two years. Inflation was 0.3% in January, marking the lowest rate of British consumer inflation since 1988. Carney said that falling prices of oil and food accounted for three-quarters of the current weakness in inflation. However, he stressed that those drivers were "temporary, one-off development". Carney also said that there was a probability that borrowing costs would be higher at the end of the central bank's three-year forecast. 

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