The NIESR yesterday indicated that the UK economy expanded at a robust pace in the three months to June compared to the previous quarter, renewing expectations that the BoE is inching closer to moving the benchmark interest rate upwards. The upbeat assessment is good news for Chancellor George Osborne, who will unveil his post election budget today.

Euro zone officials yesterday hammered out a five day deadline for reforms and aid that could keep Greece in the currency union. While developments from Greece will continue to dominate headlines today, minutes from the FOMC meeting later will also attract significant market attention. The Fed minutes from the last monetary policy meeting will be closely monitored for fresh cues to the timing of an interest rate rise.

Pound Sterling – UK Markets

The Pound dropped to a multi-week low against the US Dollar yesterday, with the pair falling below the 1.55 mark, despite upbeat growth numbers. The latest estimate by the NIESR indicated that Britain’s recovery picked up pace in the second quarter. The leading think-tank indicated that the economy expanded at a rate of 0.7% for the three months ending in June, suggesting a firmer pace of growth compared to the sluggish growth witnessed early this year. This could give a boost to expectations that the BoE will begin increasing interest rate early next year. Meanwhile, the NIESR also added that the ongoing Greek crisis could have an impact on the timing of the rate rise.

The BRC earlier today stated that shop prices in the UK fell at a slower pace for June compared to May, as consumer sentiment strengthened on the back of heavy discounts offered by retailers and rising wages. Additionally, data showed that British house prices, as reported by Halifax, rose more than expected on a monthly basis for June following a decline in May.

US Dollar – US Markets

The US Dollar is trading higher against the Pound this morning, ahead of the release later today of the FOMC minutes of the June monetary policy meeting. The minutes will provide cues on when the US central bank intends to raise the benchmark interest rate. Also in focus will be views of policymakers on the labour market and their assessment of the broader inflation and growth outlook. The Fed members are likely to consider the improvement in second quarter economic data in their assessment for policy tightening later this year. Additionally, Fed members would like to monitor the ongoing developments in Greece before implementing a policy change. Meanwhile, the IMF yesterday recommended that the Fed should defer raising rates until there are greater signs of wage or price inflation.

In economic data, the US consumer credit report scheduled today is likely to reveal that the amount of money borrowed in May has reduced from April.

Euro – European Markets

The shared currency has recovered from its initial losses and the Euro-US Dollar currency pair has managed to move above the 1.10 mark today. Market participants await Greek officials submitting a detailed package of reforms to its international creditors ahead of the hard deadline set by European leaders last night. Yesterday, the Euro group heads rejected appeals from the Greek Prime Minister Alexis Tsipras for a short term loan to avert a collapse of the Greek banking system and allow the government to repay debts to the European Central Bank and International Monetary Fund. Instead, the Syriza-led government has been asked to submit a detailed plan by the end of this week in exchange for a bailout deal.

It is a slow day for economic releases in Europe. Currency traders will keep an eye on any new developments emerging from Greece that could trigger volatility in the Euro–US Dollar currency pair. Looking ahead, German trade balance and current account data is scheduled for release tomorrow.

Other Currencies – Highlights

The Japanese Yen is currently trading on a stronger footing against the greenback. The US Dollar–Japanese Yen currency pair edged lower in the mid-Asian session as intensifying worries surrounding the Greek crisis and turmoil in the Chinese stock market soured investor sentiment and boosted the Japanese Yen. Moreover, better than estimated current account in Japan supported the Japanese Yen. Data released earlier in the day showed that Japan recorded a current account surplus for the eleventh straight month in May, amid robust earnings from overseas investments and a record number of foreign tourists to Japan. The current account also got a boost from lower oil prices that have reduced energy costs for Japanese companies and in turn encouraged domestic demand. Meanwhile, a survey which measures peoples’ assessment of the current economic conditions in the Japanese economy declined more than expected in June.

In the session ahead, investors will focus on the FOMC minutes of the latest monetary policy meeting in the US for further direction.