Greece situation continues to push sterling higher
Carl Hasty, director of Smart Currency Business comments on the weekly currency market.
An eventful end to last week saw sterling push higher against the euro as the Greek government rejected a proposal from their creditors for a five month extension to ease their debt burden. They then called a referendum for next weekend and have closed the Greek banks – desperate times and as a result the euro opened this morning nearly two cents down against sterling.
In contrast sterling had a steady week against most other currencies including the US dollar.
The week ahead sees the release of some key UK data. The latest current account balance is released on Tuesday morning, a significant deficit is forecast, followed swiftly by the final update for first quarter growth figures which are expected to show a slight improvement.
Towards the end of the week, we have the release of June Purchasing Manager Indices from the UK manufacturing, construction, and services industries. Although the earlier two releases will be of interest, investors will be waiting intently for the release of data from the services industry on Friday as this sector dominates the British economy. Expectations are for small increases from Mays readings for all three indices.
Euro hurt by Greece
The Greek debacle escalated over the weekend as the Greek government called a referendum for next weekend which caused the euro and stock markets to tumble across the board as markets opened in Asia on Monday morning. It would seem, barring a miracle, that the €1.6bn repayment due to the International Monetary Fund (IMF) on 30th June won’t be paid. It doesn’t mean that the debt is automatically in default because there is a due process that needs to be gone through but it doesn’t help. So we can expect a week of high drama as events unfold for both Greece and the euro.
There is also a fair amount of Eurozone economic data to be released this week. Today we have inflation data in the form of the German Consumer Price Index (CPI) which is forecast to remain the same, followed on Tuesday with the CPI from the whole of Europe. Then later in the week we have the release of Eurozone Purchasing Managers Indices for Manufacturing and for Services for June.
Can the US dollar continue its strong week?
Last week was a strong one for the US dollar, and investors will be hoping that this week follows suit as we have a very busy week for US data releases.
Today we have data for pending home sales, forecast to be down from last month, but the big news for the first half of the week will be the consumer confidence and the ISM manufacturing Purchasing Manager Indices data releases. Positive results for these could boost the US dollar.
In the second half of the week the data releases are focused on employment. On Thursday we have initial claims figures and then on Friday the June key non-farm payroll figures plus the June unemployment rate which is expected to show a fall from the previous month’s figures.
The US dollar comes in high against its namesakes
Friday was relatively quiet in terms of data across the board. The Canadian dollar lost ground against its American counterpart as positive data from the USA on Thursday continued to push in its favour – especially as investors continued their assessment of the Greek debt talks.
The Japanese yen gained yet further ground after the release of data on consumer price, household spending and employment came in greater than expected – again especially considering the situation in Greece.
Looking at the week ahead, we have a busy week for Australia with the governor of the Reserve Bank of Australia speaking on Tuesday, Wednesday sees the release of the Australian trade balance, while Thursday sees the release of Australian retail sales. Tuesday also sees the release of the monthly Canadian GDP figures.
