Greek Fears Grow
Prime Minister, David Cameron yesterday secured an agreement for technical talks between the UK and European Union officials over the next six months on reforms and fundamental changes, ahead of a referendum to be held by the end of the 2017. In the absence of any significant domestic economic indicators today, a speech by the BoE Governor Mark Carney will be in the limelight.
Meanwhile, Greece is heading closer to defaulting on its payment to the IMF next week after yesterday’s meeting of Euro group officials ended again with no agreement. The creditors have called for a weekend meeting to avert a debt default. The Reuters/Michigan consumer sentiment data will attract some market attention in the US.
Pound Sterling – UK Markets
The British Prime Minister, David Cameron last night presented his demands as part of plans to renegotiate Britain's membership with the EU at the ongoing European Union summit. Though the summit has been dominated by talks surrounding Greece, the Prime Minister’s pitch for reform to fellow EU leaders has successfully paved the way for formal renegotiations between UK and EU officials to be conducted over the next six months. Meanwhile, market participants will keenly monitor BoE Governor, Mark Carney’s speech later today for any cues on the timing of an interest rate rise in the nation. In the absence of any notable economic releases in the UK today, the Pound is looking for direction against its major peers from global developments.
The Confederation of British Industry’s retail survey report yesterday indicated that retail sales growth slowed in June, falling back from a five-month high in May. The survey however indicated that the outlook is expected to improve, as lower inflationary pressures have provided consumers with discretionary income, which is likely to boost spending among shoppers in the coming months.
US Dollar – US Markets
The US Dollar is trading in a tight range against the Pound this morning. In the session ahead, traders will keep an eye on the revised June Reuters/ Michigan consumer expectations data to gauge the level of optimism among consumers. The second quarter growth outlook for the US economy has improved in the wake of some recent upbeat releases and expectations are that a tightening labour market will spur wage growth and increase confidence among consumers.
Yesterday, household spending in the US for May reported its biggest monthly increase in nearly six years, raising hopes that consumers have finally started spending some of the savings from lower gasoline prices. Also, the labour department yesterday indicated that the number of people seeking unemployment benefits rose moderately last week, however, the increase was less than anticipated and the number of applications remained near historically low levels. Meanwhile, the flash services PMI in the US indicated some cooling in business activity for June, and limited the US Dollar’s advance against its key peers.
Euro – European Markets
The shared currency came under renewed pressure earlier today, as markets continue to weigh up the Greek impasse after another round of talks between the nation and its international creditors at the Euro group collapsed yesterday, after the two sides failed to agree on a final reform package. Meanwhile, officials will resume negotiations at the weekend in a final effort to avert a crisis, with Greece running out of time ahead of its scheduled loan payment of EUR1.50 billion early next week to the International Monetary Fund. The Euro–US Dollar currency pair is trading close to the 1.12 mark this morning.
In economic news, German import prices for May declined unexpectedly from the previous month, while in France, consumer confidence for June was steady and better than expected. Additionally, the annual growth rate of lending in the Euro zone’s private sector rose higher than expectations for May. The lending growth had remained in the negative zone since 2012, so the end of contraction suggests that the Euro area is on the path of a modest recovery.
Other Currencies – Highlights
Data released earlier today indicated that the Bank of Japan’s core consumer price inflation rate, excluding volatile food prices, slipped to a measly 0.1% in May, though slightly better than market expectations of a zero reading. The CPI data suggests that the central bank’s desirable inflation target of 2% remains as elusive as ever, despite the BoJ’s unprecedented monetary stimulus measures to push prices higher and spur inflation in the nation. In positive news, household spending rebounded in the nation, the first positive reading since March last year. While lower energy costs due to falling oil prices over the past year have hindered the BoJ’s progress in reaching its inflation goal, it seems to have helped boost spending among small businesses and consumers in the nation. The Japanese Yen edged higher against the US Dollar on mixed macro data.
In the session ahead, traders now look forward to the revised consumer sentiment data in the US for further cues on the currency pair. Going forward, Japan’s industrial production reading for May, scheduled over the weekend, will attract significant market attention.