The EUR/GBP sunk to fresh seven-year lows on Tuesday, as the beleaguered euro continued to struggle amid ongoing talks between Greece and its EU paymasters about Athens’ proposed four-month loan extension.

The EUR/GBP hit 0.7316 in Tuesday’s European session, a new seven-year low. The pair rebounded slightly in Wednesday’s Asian session and was trading at 0.7333. The pair’s next lifeline is at 0.7319. A break below that level would expose the 0.7300 handle. On the upside, initial resistance is likely found at 0.7354.

On Wednesday Bank of England Governor Mark Carney will testify before parliament’s Treasury Committee. Britain’s top central banker is expected to highlight the country’s steady economic growth over the past year, despite plunging inflation. Carney has stated before that inflation could fall below zero by the spring and that the BOE could cut interest rates further to prevent long-term deflation. According to the Bank’s latest inflation report, the consumer price index will average around zero in the middle of the year before rebounding toward the end of 2015.

Last year investors appeared certain that the BOE would be the first major central bank to begin lifting interest rates. Given Britain’s currency macroeconomic realities, analysts expect the BOE to hold off on raising interest rates until at least the beginning of 2016.

Meanwhile, European Central Bank President Mario Draghi will visit the European Parliament in Brussels on Wednesday, where he will participate in a Plenary Debate on the ECB’s 2013 Annual Report.

Eurozone inflation is forecast to fall at a near-record pace in February, stoking concerns about the long-term health of the currency region and whether quantitative easing would be enough to kick start the recovery. While Germany posted stronger than forecast GDP growth in the fourth quarter of last year, the bulk of the gains were attributed to a weakening euro and plunging energy prices.

The European Commission will release preliminary euro area CPI figures next Monday. The ECB’s Governing Council will coalesce next Wednesday and Thursday to discuss monetary policy and unveil new economic projections.

In January the ECB announced it would pump up to €1 trillion into the currency region over the next year-and-a-half to stave off deflation. The €60 trillion-a-month bond buying program was much larger than analysts had expected. The announcement brought the ECB closer into line with Bank of England and United States Federal Reserve, which unleashed their own bond buying programs following the 2008 financial crisis.

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Lawmakers at the Bank of England voted unanimously to keep interest rates at a record low at this month’s policy meetings, although signs of division re-emerged about the outlook on monetary policy.

The BOE voted 9-0 in favour of keeping interest rates at a record-low of 0.5 percent and the size of the asset purchase facility at £375 billion, the minutes of the February 4-5 Committee policy meetings revealed today.

“In the light of that aim, and the Committee’s latest set of economic projections, all Committee members agreed that it was appropriate to leave the stance of monetary policy unchanged at this meeting,” the minutes revealed. “Given the outlook for inflation beyond the short term, there could well be a case for an increase in Bank Rate later this year.”

Although policymakers did not rule out a rate increase this year, one member did indicate that the Bank’s next move could be to loosen monetary policy rather than tighten it. Those sentiments were reflected last week after the BOE raised the possibility of cutting interest rates in light of plunging inflation.

BOE Governor Mark Carney expects inflation to fall below zero in the short term before rebounding in the next two years. Britain’s annual inflation rate fell to 0.3 percent in January, the lowest level since record keeping began in 1989, stemming from lower gasoline and food prices. This is a welcome sign for cash-strapped consumers, who have struggled with stubbornly low earnings growth for much of the recovery.

Signs of wage growth have reappeared in recent months. Average earnings including bonus rose 2.1 percent annually in the three months through December, outstripping inflation by the widest margin since 2008, the Office for National Statistics reported today. Economists forecast an increase of 1.7 percent after wage growth averaged 1.8 percent in the three months through November.

Excluding bonuses, average earnings rose 1.7 percent annually between October and December, slightly below November’s 1.7 percent pace.

The UK labour market continued to improve at the end of last year, with the unemployment rate falling from 5.8 percent to 5.7 percent in the three months through December. Jobless benefits, which are a narrower measure of unemployment, declined by 38,600 to 823,000 in January, compared to a median estimate calling for a 25,000 drop.

The BOE expects unemployment to fall further over the forecast period, as the labour market gradually returns to full capacity.

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The British pound edged lower against the US dollar on Tuesday, as UK inflation fell to its lowest level since 1989, although core inflation reassured investors Britain was not facing any systemic price collapse.

The GBP/USD tumbled 0.25 percent to 1.5321. The pair is testing initial support at 1.5320. A break below this level exposes 1.5277, followed by 1.5216. On the upside, initial resistance is likely found at 1.5424, followed by 1.5485 and 1.5528.

In economic data, UK consumer prices declined more than forecast in January, stemming from cheaper energy and food costs. Monthly CPI plunged 0.9 percent, the Office for National Statistics said on Tuesday. In annual terms, UK inflation was 0.3 percent in January, the lowest level since record keeping began in 1989.

Core inflation, which strips away volatile goods such as food and energy, advanced at an annual rate of 1.4 percent, the highest level in three months and reassuring investors Britain was not succumbing to Japan-style deflation. The steady rise in core inflation also removed doubts the Bank of England would delay raising interest rates this year. The latest fall in consumer prices is in line with the BOE’s forecast. According to central bank Governor Mark Carney, consumer prices will probably fall below zero before making their long climb back to target levels in the next two years.

In US data, homebuilder confidence weakened unexpectedly in February, as heavy snowfall throughout much of the United States weighed on home sales and buyer traffic. The National Association of Home Builders’ housing market index declined two points to 55 in February, compared with forecasts calling for a one point increase. A reading above 50 means home builders are generally optimistic about housing market conditions.

Despite the downtick, housing market conditions are likely to improve in the coming months, as more plentiful jobs and declining mortgage rates boost home sales. The US economy added 257,000 nonfarm payrolls in January, marking the 12^th consecutive month employers added more than 200,000 jobs.

“For the past eight months, confidence levels have held in the mid- to upper 50s range, which is consistent with a modest, ongoing recovery,” said NAHB chief economist David Crowe. “Solid job growth, affordable home prices and historically low mortgage rates should help unleash growing pent-up demand and keep the housing market moving forward in the year ahead.”

The Department of Commerce will report on US housing starts and building permits on Wednesday.

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