Greece risks default after Eurogroup talks end without deal

Enrique Díaz-Álvarez19/Jun/2015Currency Updates


Sterling reached a fresh seven year high against its trade weighted basket of currencies yesterday, despite slightly disappointing retail sales data. The UK currency appreciated by 0.4% against the Dollar.

Growth in sales at retail stores remained unchanged at 4.6% in May from a revised figure in April, marginally below forecasts of a 4.8% increase. A 1.6% decline in sales of clothing, driven by moderately cooler weather in the UK in May, caused sales to increase by just 0.2% for the month. Food sales on the other hand had an impressive month, up by 0.6%, its greatest increase since December. Despite missing out on estimates, the strong data will be more welcome news to the Bank of England hawks following Wednesday’s impressive wage growth figures, as policymakers in the UK weigh up the possibility of a rate hike in the coming quarters.

Friday will see a relatively quiet end to the week in the UK economy, with the only data release of note that of public sector borrowing from the Bank of England at 9.30am BST.


Dollar weakness on the back of the FOMC on Wednesday caused the Euro to gain by 0.2% on Greenback. Greece was the focus again, with Eurogroup members meeting in Luxembourg for the latest round of discussions, which as expected failed to reach an agreement. Eurogroup head Jeroen Dijsselbloem called for Greece to seize its last opportunity to submit credible proposals in the coming few days. Earlier, the IMF said Greece could not avoid default if it failed to repay its June obligations, while Christine Lagarde claimed there would be no grace period. An emergency summit will be held on Monday.

The severity of the situation was amplified when it was announced a total of 2 billion Euros in deposits has been withdrawn from Greece in the first three days of the week alone, with the pace of outflows tripling since the weekend. This acceleration in withdrawals will no doubt increase pressure on the government to introduce capital controls should a deal fail to be reached before 30th June deadline.

Elsewhere, banks took a larger than expected 73.8 billion Euros in the fourth tranche of the ECB’s long term loans, known as targeted LTRO. Economic finance ministers will be meeting in Europe today, with the Greek crisis once again on the agenda.


The Dollar traded around a one month low, down 0.2% against its peers on Thursday following Wednesday night’s FOMC meeting where policymakers failed to signal the timing of its rate increase.

Despite missing out on forecasts, inflation in the US economy recorded its largest monthly gain in more than two years in May, boosted by surging gasoline prices in the clearest sign yet that the recent energy-driven disinflationary trend has come to an end. Consumer prices rose by 0.4% on a month previous, emerging from negative price growth on an annualised basis, having remained static on twelve months ago. The sharp 10.4% increase in petrol prices was the largest since as far back as June 2009. The core rate of inflation also missed expectations, with prices excluding food and energy up by 1.7% from the 1.8% recorded in April.

There were a number of smaller, second-tier announcements yesterday afternoon. The Philly Fed manufacturing survey far outstripped forecasts, climbing to a six month high 15.2 after nearly every component of the survey increased on previous. The Conference Board’s leading indicator also impressed, increasing by 0.7% in May, aided by residential construction and higher consumer expectations. Weekly jobless claims were strong once again, falling to 267,000 last week. The four week moving average fell by 2,000 claims to 276,750.

Rest of the world

In line with expectations, Norges Bank cut its interest rate by 25 basis points to a record low 1%. Dovish commentary from the central bank gives a firm indication that rates are set to be reduced even further this year, likely in the autumn. Meanwhile the Swiss National Bank maintained its record low interest rate of -0.75%, although warned it was ready to take further action.


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.