A strong day for UK data, while Greece defaults

Sterling traded in a much tighter range versus the euro and the US dollar yesterday in what seemed like a “let’s wait and see” day for traders. However, it was a positive day for UK economic data releases. UK Growth (GDP) figures were released in the morning session and showed that the UK economy grew faster in the first quarter of this year than previously estimated.

The Office for National Statistics (ONS) raised its estimate for growth in Q1 from 0.3% to 0.4%. Annual growth was also revised upwards, from 2.4% to 2.9%. Last year, as a whole, growth changed to 3%, the fastest rate since 2006.

Also released yesterday were consumer confidence figures which showed a recovery to a level not seen since the turn of the century, a result of ultra-low inflation, rising employment and improving wage growth. The GfK consumer confidence index increased to a level of 7, the highest since 2000.

This morning will see the release of UK PMI manufacturing data as well as the Bank of England’s financial stability report, but, of course, any headlines regarding Greece will take centre stage

Tuesday saw the euro weaken over 0.5% against both Sterling and the dollar, with the markets widely expecting Greece to default on its payment to the IMF on Tuesday evening. Even with nearly all economic data leaving Europe offering positive sentiment, it was unable to sway the tide with the markets solely focused on the ever closer Grexit.

This prediction was verified last night, making Greece the first Western county to go into arrears on its debt repayment to the IMF. Until this outstanding balance to the IMF is rectified there will be no further funding to Greece, or extensions granted. To further the Greek demise, Fitch downgraded its junk credit rating from CCC to CC. All of these events contributed to the euro weakening 0.33% immediately upon the markets opening this morning versus GBP.

All eyes will remain on the euro group meetings today, to see if any new information emerges.

The CB Consumer Confidence Index beat analysts’ expectations yesterday, rising to 101.4 from last month’s 94.6. Conference Board member, Lynn Franco, said “over the past two months, consumers have grown more confident about the current state of business and employment conditions, therefore people now seem more optimistic about the near term future.” Naturally, this will be viewed positively in the Fed’s eyes as they assess the health of the US economy before a potential rate hike in September.

Despite such a positive figure, the markets broadly failed to react to the announcement. GBP/USD actually saw gains before retracing back down to finish the day flat. Against the euro, the dollar clawed back some of Monday’s losses, finishing the European session around 1.1150 (IB). Given the current state of affairs in Greece, all eyes are focused on Europe and that seems to be dictating trends more so than data.

Today we have ADP Employment Change figures, as well as Manufacturing PMI, both of which are high impact data. These are forecast to read in line with consensus figures, but beware of any changes that may cause volatility.