How will sterling be affected by the Greece situation this week?
Last week was a good week for sterling with it gaining ground against most currencies. The only currency where the gains were muted was against the euro – which is difficult to understand given the problems with the Greek debt negotiations and fast approaching deadlines. Perhaps investors can’t believe the politicians would be so stupid as to allow the Greeks to leave the Eurozone. We wait and see if this assumption is correct.
This week there is little in the way of influential UK data to be released. While mortgage approvals on Wednesday, and lagging retail sales data from the Confederation of British Industry due on Thursday, this data is unlikely to have significant impact on sterling. Instead, the markets will be watching for the release of industry growth data from the Eurozone, and the final confirmation of US economic growth throughout the previous quarter.
With the Greek debt situation still far from resolved too, we expect to see sterling movement dependent on how talks progress between Greece and her creditors.
Greece remains at the forefront of everyone’s interest
On Friday, the situation and general demand for the single currency remained under pressure over the ever-growing concerns about the Greek debt situation. The current bailout for Greece expires on 30 June, when Athens is also due to repay the International Monetary Fund (IMF) €1.6bn.
The euro has weakened across the board and it is expected to remain unstable until Greece are able to reach an agreement. Interestingly, there has been discussion that Russia may well begin to finance Greece. However, on Friday the IMF chief Christine Lagarde made it clear that if the payment due at the end of this month is not made on time, Greece will be declared bankrupt and would therefore be disqualified from receiving any further IMF funds.
The main focus for this week will continue to be on Greece, but there may well be a potential respite from Purchasing Manager Index data on Tuesday, or perhaps the German IFO business confidence data on Wednesday. Whatever happens, we expect to see a tough week for the single currency.
Big week ahead for the dollar – will it turnaround?
Another difficult week for the US dollar is just finished and we expect this week to be one of movement for the US dollar, with some notable data releases due, along with expected news about Greece and the Eurozone.
Monday sees the release of existing home sales data for the US, and this is forecast to be very positive – at the highest growth seen since October 2013. Durable goods orders data will be released on Tuesday, and this is also expected to be positive, following lows in recent months. These will be followed by the initial manufacturing Purchasing Managers’ Index (PMI) for June, which is expected to also show slight growth in the sector.
The main focus though will be on Wednesdays Final Gross Domestic Product (GDP) release, and this is expected to rise – although remain negative, As has been reported by the majority of the US Federal Reserve members, the US economy experienced a slowdown in the first half of the year but this is mainly attributed to seasonal factors and the low oil price. However, if the GDP falls less than expected, there could be some strength in the US dollar.
Thursday is also expected to be a busy day for data from America, with both weekly unemployment claims and personal spending. The US Federal Reserve are hoping for a personal spending increase, in line with the retail sales increase that we saw earlier this month; this is because both these figures are important indicators for a possible interest rate rise later this year.
Busy week ahead for the yen
This week is expected to be a big one for the Japanese, with an economic data release due nearly every day this week. After ending last week on a high, gaining back 1% against sterling, they will hope for more of the same with their Monetary Policy Meeting Minutes being released on Wednesday.
After a fall of nearly 4% against sterling last week, the New Zealand dollar will be looking for a better week ahead. Early week releases, including credit card spending, are unlikely to affect its strength too much – but the trade balance due on Thursday is the most likely to cause any real movement. With figures forecast to be much worse than last month, they will be praying that data matches at least expectation – or we could see further weakening of the New Zealand dollar.
