Headlines
GBP/EUR Holds 1.41 before Crisis Talks –
Time running out for Greece
Euro could Plummet Today –
Agreement essential to ‘stave off economic disaster’
US Dollar Recovers from Data Dip –
Safe-haven demand supports ‘Greenback’
RBA Leaves Interest Rates on Hold –
Australian Dollar trends lower on Greek concerns
Sterling
Prior to the release of the UK’s Industrial/Manufacturing Production data the Pound was holding the 1.41 level against the Euro but fell 0.3% on the day’s opening level against the US Dollar.
On Monday the GBP/EUR exchange rate advanced as investors came to terms with what the outcome of Sunday’s referendum could mean for Greece. However, any Sterling gains were limited ahead of today’s emergency gathering of key European leaders.
Over the next few hours Greek Prime Minister Alexis Tsipras must present creditors with a viable plan for his nation to remain within the Eurozone. With capital controls imposed for a second week and the European Central Bank (ECB) making it more difficult for financial institutions in the nation to access emergency loans, the situation is becoming increasingly desperate.
Given the few options Greece still has available and the fact that its creditors have largely run out of patience it is hoped that a deal will be struck today. However, if an agreement fails to materialise there’s every chance the GBP/EUR exchange rate could return to trending at 7-year highs before the close of trading.
Euro
The outcome of today’s Greek crisis talks could change the face of Europe and have a dramatic impact on the Euro.
If Tsipras appears willing to compromise on issues like spending cuts and tax increases, he may finally be able to come to terms with lenders and unlock the aid Greece so urgently needs.
Any indications that the day’s gathering will result in an agreement being forged would be Euro-supportive and help the common currency recover recent losses.
However, if Tsipras digs his heels in and uses the ‘No’ victory in Sunday’s referendum to fight against the introduction of further austerity, the nation’s creditors may decide it’s time to walk away from the negotiating table and plan for a future without Greece in the currency bloc.
This outcome has the potential to drive the Euro to fresh multi-year lows against peers like the US Dollar and Pound so investors will be focused on Greece in the hours ahead.
Demand for the Euro was also undermined today as German Industrial Production was shown to have stagnated on a month-on-month basis in May rather than rising the 0.1% expected.
US Dollar
On Monday the US Dollar briefly dipped against the Pound as the US ISM Non-Manufacturing Composite Index failed to rise by as much as expected.
Although the measure of the nation’s services sector did improve from 55.7 to 56.0, a stronger reading of 56.4 had been predicted. Markit’s final US Services PMI for June also held at 54.8 rather than being revised to 54.9.
The day’s other US ecostat, the nation’s Labour Market Conditions Index, provided further disappointment by defying the 2.0 forecast and printing at 0.8.
However, with investors hedging their bets amid the Greek uncertainty, the safe-haven US Dollar wasn’t kept down for long and the asset gained on the Pound, Euro, Australian Dollar and Canadian Dollar early in the European session.
Today’s only US data, the nation’s trade balance figure, may have a modest impact on ‘Greenback’ demand but the progress of negotiations in Greece will be the main cause of volatility in the currency market.
Canadian Dollar
Sliding oil prices left the Canadian Dollar struggling on Monday but the commodity-driven currency was able to recover lost ground despite Canada’s Ivey Purchasing Managers Index for June sliding from 62.3 to 55.9. A steeper drop to 55.5 had been anticipated.
Canada’s Business Outlook Future Sales number for the second quarter was also slightly disappointing in that it climbed from 4.0 to 8.0 rather than achieving the 12.0 forecast.
The ‘Loonie’ was able to post modest gains against rivals like the Pound and Euro on Tuesday as oil prices stabilised following the previous day’s almost 8% slide. Shifts in the commodities market are likely to continue driving the Canadian Dollar throughout the rest of the session.
Australian Dollar
The Australian Dollar initially gained in the aftermath of the Reserve Bank of Australia’s (RBA) interest rate announcement. The central bank opted to leave borrowing costs on hold due to the recent weakening of the domestic currency.
However, with the AiG Performance of Construction Index falling further below the 50 mark separating growth from contraction, Australian consumer confidence easing and the situation in Greece limiting demand for higher-risk assets, the ‘Aussie’ later weakened beyond the 2.09 level against the Pound and hit a low of 0.7422 against the US Dollar.
The New Zealand Dollar posted widespread declines on Tuesday as investors responded to the situation in Greece and the NZIER Business Opinion Survey for the second quarter.
The business index plummeted from 23 to 5 in the three months through June. Tomorrow’s domestic card spending data could impact the direction taken by the ‘Kiwi’ in the second half of the week, but developments in Greece will also have an impact on the appeal of the currency.
Data Released Today
09:30 GBP Industrial Production (YoY) (MAY) Medium
09:30 GBP Manufacturing Production (YoY) (MAY) Medium
12:00 EUR Eurogroup Summit On Greek Referendum High
13:30 USD Trade Balance (MAY) Medium