Headlines
No significant UK data releases –
Quiet week ahead.
New Greek proposal causes optimism –
Officials hopeful of deal this week.
GBP/USD slides slightly –
Traders lock-in profit.
GBP/AUD still close to 71-month high –
GBP/NZD close to 5-year high.
Sterling
This week is hotting up to be one of the most boring in ages in terms of direct Sterling stimulus. There is very little in the way of British ecostats due for release this week; the only release deemed to have a ‘medium’ level of importance is Wednesday morning’s BBA loans for house purchases report, which is expected to show a mild acceleration in mortgages from 42,116 in April to 43,350 in May. Even this data is unlikely to have a massive impact on Sterling trading.
Therefore, in the absence of any major UK releases, market sentiment is likely to be dictated by goings-ons in the Eurozone, and more specifically, in Greece.
Euro
The Pound to Euro exchange rate fell by around a cent yesterday afternoon in reaction to news that Athens’ latest proposal had been considered a ‘positive step in the process’.
It is believed that Greece’s creditors were pleased by the Hellenic nation’s plans to introduce new taxes on business, selected consumer goods and the wealthy, which meant that Syriza would not have to cross its red lines on pensions and wages. The Eurogroup said the new concessions could help leaders negotiate a new deal by the end of the week. This news sent Greek bank stocks rallying 20%.
However, the Pound recovered during the evening as traders fretted over the possibility that Greece’s latest proposals might not make it through parliament even if they are accepted by the institutions.
If, as many officials from both sides of the negotiating process suggested, a deal is reached later in the week, we could see lots of relief rallies and a sharp appreciation in the single currency. However, if the latest spark of optimism peters out then we could see GBP/EUR challenge new seven-year highs.
US Dollar
Sterling remains close to its highest level in seven months against the US Dollar despite a half-cent depreciation yesterday as investors looked to lock-in profit.
The ‘Greenback’ could run into trouble later this afternoon if data shows, as expected, that US durable goods orders decreased -0.7% in May. Markit’s gauge of manufacturing is predicted to print at 54.1 but traders are generally more interested in the ISM factory output index and therefore the durable goods report is likely to take centre stage.
Technical trading patterns show that GBP/USD is still in an uptrend but further gains for the Pound could be difficult unless US data comes in significantly lower-than-expected.
Canadian Dollar
The Pound to Canadian Dollar exchange rate weakened by over a cent during the morning yesterday as investors locked-in profit from last week’s four-month high. The commodity-correlated ‘Loonie’ also drew some support from the crude oil market, which saw an uptick in demand over the day. However, Sterling recovered most of its losses during the evening.
Like the UK economic calendar, the Canadian schedule is severely lacking in terms of interesting events this week and therefore wider market trends are liable to dictate movements in GBP/CAD.
Australian Dollar
The Pound began the week trading sideways against the Australian Dollar and the pairing looks set to continue on this path. There were no economic releases directly related to either currency and there are no significant data prints on the agenda this week in Australia either. GBP/AUD is currently sitting just south of a 71-month high.
Maybe we can hope for a surprise statement from the Reserve Bank of Australia to breathe some life into the currency market?
New Zealand Dollar
Sterling remained close to five-year highs against the New Zealand Dollar yesterday despite a slight uptick in demand for perceived riskier assets due to the latest positive developments in Greece. The Pound to New Zealand Dollar exchange rate fluctuated throughout the day but, with the ‘Kiwi’ set to lose some of its interest rate differential over the next few months, traders were reluctant to take GBP/NZD lower.
Data Released Today
09:00 EUR Markit Eurozone Composite PMI (JUN P)
13:30 USD Durable Goods Orders (MAY)
14:45 USD Markit US Manufacturing PMI (JUN P)