Euro rallies after Greek government hints of bailout deal
28/May/2015 • Currency Updates•
Another session of broad Dollar strength against its major peers led to Sterling to depreciate by 0.5% against Greenback on Wednesday.
Confidence among UK consumers is at its highest level in more than nine years according to research company Nielsen. Consumer confidence increased for the fifth straight quarter in the opening months of the year, to the highest since the financial crisis. Improving job prospects, low inflation and a modest pickup in wages boosted the proportion of those surveyed who felt now was a good time to spend, up to 45%. The number of people in the UK feeling positive about job prospects increased for the eighth consecutive quarter to its highest level in more than seven years. This echoed Tuesdays report from the CBI that stated British retailers were at their most optimistic in 27 years. In other news, yesterday’s Queen’s speech at the House of Commons confirmed that the new Conservative government will renegotiate the UK’s relationship with the EU, including a referendum by the end of 2017.
Any revisions in today’s Q1 growth figures could cause movement in the Pound when announced at 9.30am this morning.
Despite rallying in the afternoon, the Euro ended the day lower against the Dollar, declining by 0.3%.
There was some optimism at last in Greece on Wednesday, littered among some typically mixed reports from both sides. Prime Minister Alexis Tsipras claimed that a deal with the country’s Eurozone creditors was close, with details to be presented “soon”. Greek officials claimed that the two sides had even begun drafting a staff-level agreement. However, creditors still appear divided over a number of issues, with European Commission insiders insisting that a deal was still some way off. Earlier, it was announced that the ECB left the emergency liquidity assistance limit (ELA) unchanged at an “adequate” 80.2 billion Euros.
In terms of data releases, consumer confidence in Germany increased in a similar vein to that in the UK, reaching a thirteen year high according to GfK. A positive economic outlook and low inflation have persuaded German consumers to spend more in the past month, despite uncertainty surrounding the situation in Greece. The index rose from 10.1 to 10.2 this month. In contrast, confidence in France declined on a month previous in a similar report, down from an index of 94 to 93.
Today will see a number of smaller data releases at 10am BST in the Eurozone, including consumer and industrial confidence. The main event of the day, however, will be the release of the European Union’s bi-annual financial stability report at 11am.
The US Dollar ended higher against its major peers as investors continue to bet on an interest rate hike in the US this year. The US Dollar index ended the London trading session 0.5% higher, despite limited economic news in the world’s largest economy.
Yesterday was a mostly quiet one in the US. The generally volatile measure of mortgage applications fell last week, down by a seasonally adjusted 1.6% in the week ending 22nd May. The survey, which covers over 75 percent of US retail residential mortgage applications, has now decreased for the past four weeks. In other releases, the Johnson Redbook index, a broad measure of retail sales in the US, declined marginally by 0.3%, marking the third straight week of no growth.
No major data releases in the US on Thursday. However, the weekly jobless claims figures and pending home sales will be worth noting when announced at 1.30pm and 3pm (UK time) respectively.
Rest of the world
The Russian Ruble slipped by the most in the world on Wednesday, down by almost 2%, as softer oil prices caused the currency to weaken. Elsewhere, Turkey’s Lira weakened as investors feared the ruling AK Party may have to form a coalition after the elections on 7th June.