Cameron side-lined as European issues take precedence

With very little in the way of economic data releases from the UK yesterday, the pound’s movements were dictated by events elsewhere, namely the ongoing Greek saga. GBP/EUR and GBP/USD both traded within a relatively tight range of under 100 points throughout the day. UK Prime Minister, David Cameron, was due to make his case for EU reform yesterday evening, but his time was cut short as discussions about a Greek default and the escalating migrant crisis in the Mediterranean took centre stage. The only other data release worth mentioning came in the form of the CBI retail sales balance. This is a survey of the retail sector measuring sales volumes. The reading printed +29 for June, down from the previous month’s reading of +51. Retailers had been expecting another strong month especially after the reading from May (which was the best in 26 years). Although the release was down from the expectation, retailers are still optimistic about sales for the remainder of the year. With no economic data releases from the UK today, all eyes and ears will be on the Bank of England Governor Mark Carney’s speech later this afternoon for further clues about their stance regarding interest rates and inflation.

Poor Greek proposals reflect on the euro

The Greek government saw two reformed proposals criticised on Thursday causing the euro to initially slide over 0.67% against Sterling. Firstly, the European Finance Ministers stated the updated proposal to creditors were not suitable for a re-discussion. Secondly, the meeting with European prime ministers led to Angela Merkel stating: “We still haven't made the necessary progress; in some places it looks like we're even going backwards”. Many of the small spikes seen on Thursday can be attributed to the market reacting to rumours leaving Brussels. All eyes will remain on Brussels this weekend to see if Greece can produce a reformed proposal by Sunday morning. This morning saw poor economic data from Germany with import prices m/m at -0.2%, which was 0.4% lower than expectation. This only increases fear in the market that deflationary pressures are getting stronger within Europe. If this trend continues, we could see the euro depreciate against all its major partners across the next 12 months.

USD fails to react to positive data. Market awaits outcome from Greece

Yesterday saw the release of US initial jobless claims for the week ending June 19 that came out slightly better than expected at 271K. Personal income came in line with expectations at 0.5%, whilst personal spending rose to 0.9%, the fastest increase since August 2009. One would have thought that this would have given support to the Greenback. However, the currency ended the day only 0.14% lower against Sterling and 0.10% up against the euro. It seems as if investors are staying on the side lines until a deal has been agreed between Greece and its creditors. Nonetheless, this data will be viewed positively by the Federal Reserve in the build up to the expected September rate hike. Today we have the Michigan Consumer Sentiment out at 15.00, which will give us a further insight into average US consumer confidence levels. However, if the weekend brings any surprise positive news over Greece, we could see an upward movement of GBP/USD extending to above 1.58 IB.