Euro rallies to 1.1279 on Greek news and rise in German bund yields: May 13, 2015

Market Review - 12/05/2015 23:05GMT 
 
Euro rallies to 1.1279 on Greek news and rise in German bund yields

The single currency rallied from 1.1134 to as high as 1.1279 on Tuesday after Greek Prime Minister Alexis Tsipras called on lenders to break an impasse in cash-for-reform talks after Athens had to resort to a temporary expedient to make a crucial payment to the IMF.

Prime Minister Alexis Tsipras told his cabinet that Greece has offered as much as it can and it is now the turn of its EU and IMF lenders to help break an impasse in talks on a cash-for-reforms deal. "The Greek side has so far fully met everything the Feb. 20 Eurogroup decision foresaw. It has taken as may steps as possible towards the European partners' side, showing in practice its respect towards the procedures, the rules and the euro zone framework," the official quoted Tsipras as telling his cabinet.

"It's now our partners' turn to make the necessary steps in order for them to prove in practice their respect towards the democratic popular mandate." The comments came after euro zone finance ministers on Monday noted progress in talks but said that more work was needed to narrow remaining gaps. Sources say these are mainly over pension and labour reforms and budget targets.

The greenback briefly penetrated Monday's high at 120.15 to 120.27 in Asia on Tuesday, however, profit-taking capped dollar's upside. U.S. dollar then ratcheted lower in Europe and dropped to an intra-day low of 119.79 in New York due to renewed cross buying in Japanese yen.

San Francisco Fed President John Williams said the Federal Reserve's ability to delay its initial interest rate hike is now "more limited" than its ability to quickly tighten monetary policy. Williams added that he is now "reasonably confident" that inflation will rise to the U.S. central bank's 2-percent target over the medium term, and that the labor market would continue to improve. Those are two markers the Fed has set for raising rates from near zero, where they have been for 6-1/2 years.

Despite cable's drop to 1.5557 in European morning on Tuesday, the British pound jumped after the release of upbeat U.K. industrial production data due to active cross buying in sterling. Cable rallied to a fresh near 5-month peak at 1.5710 in Europe before trading sideways in New York. Investors are waiting for the Bank of England's latest inflation report and wage and labor data on Wednesday.

Wednesday will see the release of New Zealand's food price index, Japan's current account, Australia's wage price index, Japan's economy watchers, China industrial output and retail sales, Germany's final CPI, GDP, HICP, U.K. claimant count unemployment, ILO unemployment rate, eurozone GDP and industrial production, U.S. export prices, import prices and retail sales.