Time is running out for Greece

With no UK data released yesterday, Sterling movements were dictated by events elsewhere, leading to gains against the single currency and losses against the US Dollar. With inflation dropping into negative territory for the first time in over 50 years, speculation is rife that the Bank of England will delay an interest rate rise for the foreseeable future, despite Mark Carney attempting to appease the market by describing the inflation figure as a momentary blip. No doubt Carney will watch each inflation report until the end of the year with baited breath, as economists evaluate the prospect of inflation falling in line with the BoE mandated 2%. With no UK data released today we can expect Sterling movements to once again be dictated by events elsewhere alongside interest rate speculation.

The Euro extended losses yesterday as Greece once again remained firmly in the spotlight. The concerns regarding a Greek default and subsequent exile from the Eurozone seem to be exacerbating as the next payment deadline looms next week. Speculation is rife that Greece will not be able to meet its next debt obligation, with a Government spokesperson stating that a deal with its international creditors would be vital in avoiding default, although the creditors in question seem to be standing their ground, and time for Greece is running out. As a consequence of the speculation EUR/USD hit a one‐month low at 1.0871 and the Euro remains firmly under pressure. With little discernible data released today from the Eurozone, attention is likely to continue to be fixated on Greece ahead of the next debt deadline on 5th June. A further complication for potential negotiations is the struggle and divergence within the ruling Syriza party over whether to swallow the creditors’ tough terms or default. In an example of the desperation, members of the Greek government are considering a levy on ATM withdrawals in the hope of encouraging consumers in Greece to use credit cards rather than deal in cash.

The US Dollar was the standout gainer yesterday, clawing back recent losses across the board amid recent improvements in fundamental US economic data coupled with a newly adopted hawkish stance from the Federal Reserve. The greenback is posting fresh highs following a durable goods orders report for April, which indicated the gauge for business investment rose for a second straight month. Financial assurance is also being boosted, with a consumer confidence survey posting 95.4 against 95.2 estimated and 94.3 previously. In the final piece of positive US data, New Home Sales rose by 517K, significantly more that the 501K best analyst consensus and 484K previously and giving strong indications the US economy is back on track. With no data released today, we can expect the US Dollar to be dictated by ongoing speculation regarding an interest rate hike. FED chairwoman Janet Yellen hinted that the Central Bank is on track to raise interest rates this year, a notion recently dismissed. The markets have been waiting for some discernible data or sentiment to restart the US Dollar rally, and the latest FED stance has gained some renewed optimism.