Greece uncertainty continues as Draghi calls for imminent deal

Enrique Díaz-Álvarez16/Jun/2015Currency Updates



After a poor start to the day, the UK currency rose against the Dollar as markets opened in New York. Sterling ended the London session 0.3% higher on Greenback.

Economic news out of the UK economy was at a premium on Monday. Sterling was instead driven almost exclusively by goings on elsewhere, namely developments in Greece and the build-up to the Federal Reserve meeting on Wednesday. The Pound was able to remain at its strongest position of the month against a trade weighted basket of currencies as markets await a key week of announcements that could offer clues as to the timing of the next interest rate hike.

This morning we may well see some sharp movements in Sterling following the release of a string of economic announcements from the Office for National Statistics. The latest inflation data for May and the producer price index are all set for release during early morning trading at 9.30am. Inflation is forecast to tick upwards back into positive territory, having declined into negative last month for the first time in over fifty years. Then on Wednesday, the Bank of England will be releasing its latest monetary policy minutes from its June meeting, in tandem to employment figures, which are expected to show wages continued to march upwards in April.


The Euro continues to be mostly unfazed by the uncertainty in Greece following a stalemate in weekend discussions. In fact, the single currency appreciated by 0.5% versus the Dollar.

There were mixed signals as always in Greece. Both the Greek government and European Commission blamed each other for the collapse in weekend talks, which lasted less than an hour. A government spokesman claimed that Greece will continue working towards a deal, although insisted it will not accept fresh cuts. Speaking at a testimony to the European Parliament in Brussels, ECB President Mario Draghi claimed there needed to be a strong and comprehensive agreement with Greece soon. He concluded that the ball was very much in Greece’s court, and it was up to them to break the deadlock. Draghi also believed policymakers would have the necessary tools to defend against any Greece default situation.

Aside from Greece, the main focal point in the Eurozone today will be the economic sentiment survey from ZEW, which will give a good indication of momentum in the German economy ahead of next week’s PMI releases.


A generally poor set of economic data weighed on the Dollar as it ended the day 0.25% down on its major peers.

Manufacturing and mining both provided a drag on the US level of industrial output in May, which unexpectedly fell. A strong Dollar against almost all world currencies and energy spending cuts are continuing to weigh on production, causing the overall level of industrial output to decline 0.2% from a revised 0.5% drop a month previous. Manufacturing production was down by 0.2%, while mining slipped by 0.3%, well below the market consensus. Equally as disappointing was the New York manufacturing index, which contracted in the month of June due to a downturn in new orders. The index slide to -1.98, while the future general business conditions index, a gauge of future optimism, fell from 29.8 to 25.8.

Elsewhere, capacity utilisation dipped below forecasts to 78.1% from 78.3%, indicating little cost pressure on goods prices. However, there was positive news on the housing front, with the NAHB housing market index rising to its highest level so far this year to 59.0, no doubt welcome news to the Federal Reserve.

Tuesday will be a mostly quiet day in the US economy with Wednesday evening’s crucial Federal Reserve meeting, along with developments in Greece, dominating trading this week.

Rest of the world

Russia cut its interest rate further on Monday, as was generally expected, with concerns over a “considerable” cooling of the economy. The benchmark rate was slashed by 100 basis points to 11.5% amid contracting growth. Elsewhere, the Polish Zloty was buoyed by easing deflation while the Canadian Dollar weakened following poor factory sales.


Written by Enrique Díaz-Álvarez

Chief Risk Officer at Ebury. Committed to mitigating FX risk through tailored strategies, detailed market insight, and FXFC forecasting for Bloomberg.