Headlines
Greece presents reform proposal –
GBP/EUR Trends around 1.39
GBP/USD moves away from 1-month low –
Greek proposal reduces risk-aversion
AUD/GBP resumes downtrend –
Aussie data disappoints
Canadian Dollar down before jobs data –
Unemployment expected to rise
Sterling
The Pound rallied back above the 1.54 level against the US Dollar on Friday as the news that Greece presented its creditors with a revised list of reforms before the midnight deadline lessened demand for safe-haven assets.
However, the same news kept the GBP/EUR exchange rate trending on the border of 1.39. While the Greek proposal still needs to secure the backing of the nation’s parliament and pass the scrutiny of international lenders, the odds of an agreement being struck at Sunday’s Eurogroup gathering are looking more favourable than they have for a long while. Should the nation be granted aid and secure its place in the currency bloc, the Pound could fall back to trending at its lowest levels of 2015 next week.
Later today the UK’s Construction Output and Trade Balance numbers could have an impact on Pound Sterling trading. Upbeat UK data could potentially give the Pound a lift before the weekend. Investors will also be looking ahead to next week’s key British releases – the nation’s employment and inflation stats.
Greece is still the word and this week’s Euro fluctuations have been almost entirely the result of developments in the Hellenic nation’s bailout negotiations.
On Friday the common currency fluctuated against its major peers as investors waited to see how Greece’s reform proposals would be received by the local government and international lenders.
Signs that this latest selection of measures will be enough to secure the nation the bailout funds it desperately needs would lift the Euro in the hours ahead but any negative commentary from key officials would drive the common currency lower ahead of Sunday’s emergency summit of European leaders.
By Monday Greece’s fate could be sealed, but until anything definitive is known we can expect Euro volatility.
US Dollar
A number of factors, including China’s recovering stock market, yesterday’s disappointing US initial jobless claims data and the latest developments in the Greek bailout saga, conspired to reduce demand for the safe-haven US Dollar on Friday.
The US Dollar accordingly shed over 0.5% against the Pound, Euro and Swiss Franc. Greece is likely to remain the biggest driver of currency market movement before the weekend, but investors will also be tuning in to a speech due to be given by Federal Reserve Chairwoman Janet Yellen in Cleveland.
The minutes from the latest Federal Open Market Committee (FOMC) policy meeting indicated that the central bank will delay hiking interest rates until the domestic economic recovery is more ingrained and the global outlook more stable. If Yellen references borrowing costs in today’s speech and further reduces the odds of a September adjustment, the formally bullish US Dollar could turn bearish before the weekend.
Canadian Dollar
Thursday’s Canadian housing data printed above forecast and oil prices staged a rebound as Chinese stocks rose, but the Canadian Dollar still opened Friday’s European session in a weaker position against the Pound.
The ‘Loonie’ was also down against the Euro ahead of the publication of the latest Canadian employment figures. Economists have forecast that Canada lost -10,000 positions in June following the 58,900 jobs increase in May. This would take the nation’s unemployment rate up from 6.8% to 6.9% and could give the Bank of Canada (BOC) more cause to cut interest rates.
Below-forecast numbers would see the Canadian Dollar soften but a positive surprise is likely to give the commodity-driven currency a boost.
As the weekend approached the Australian Dollar gave up some of the gains accrued earlier in the week despite an increase in Chinese share prices.
A brighter outlook for Greece might have upped the appeal of higher-risk assets and helped the AUD/USD exchange rate stabilise above 74 US cents but both the AUD/GBP and AUD/EUR pairings registered declines as Australian lending data disappointed.
Australian home loans were shown to have fallen by -6.1% in May, over double the -3.0% decline expected, while investment lending dropped -3.2% and the value of loans plummeted -5.3% month-on-month.
Like the Australian Dollar, the New Zealand Dollar softened against the Pound and Euro on Friday.
The ‘Kiwi’ was able to post a modest gain against the US Dollar however as reduced ‘Grexit’ concerns challenged the ‘Greenback’s bullish run. Next week New Zealand’s Performance of Manufacturing Index and second quarter inflation data is likely to have a notable impact on the New Zealand Dollar’s performance.
With the Reserve Bank of New Zealand (RBNZ) due to deliver its interest rate decision the following week, flagging consumer price gains could be just the impetus the central bank needs to slash borrowing costs.
Data Released Today
09:30 GBP Total Trade Balance (Pounds) (MAY) Medium
09:30 GBP Construction Output s.a. (MoM) (MAY) Low
13:30 CAD Net Change in Employment (JUN) High
13:30 CAD Unemployment Rate (JUN) High
15:00 USD Wholesale Inventories (MAY) Medium
17:00 USD Janet Yellen Speaks at the City Club of Cleveland Medium