Greek Government holds late night debt talks
25/Jun/2015 • Currency Updates•
Comments from a central bank member, who recently voted to hike interest rates in the UK, sent the Pound temporarily higher on Wednesday, although it ended the day down against its peers, having fallen by 0.5% versus the US Dollar.
Long standing hawkish member of the Bank of England’s monetary policy committee Martin Weale yesterday reignited speculation that the central bank could hike rates sooner than expected. Weale echoed our recent views by claiming that faster than expected growth in wages and a strong labour market indicate that the Bank of England should be ready to raise rates as soon as August. He also criticised those who suggested any increase in the current 0.5% interest rate would cause serious damage to the UK economy.
It was another quite day in terms of data releases. Mortgage applications came in mostly in line with expectations at 42.5K in May, marking the highest monthly reading since July 2014.
Attention among traders in the UK this morning will be on the Confederation of British Industry’s industrial trends survey, a measure of long term trends in UK retail, set for release at 11am.
A frustrated Alexis Tsipras failed to bridge the gap with Greece’s creditors on Wednesday. This fresh uncertainty weighed on the Euro, which depreciated by 0.1% against the US Dollar.
Shares across Europe were sent tumbling yesterday morning after Greece’s creditors refused to accept the country’s latest reform proposals, with VAT, pensions, and tax still key sticking points. This dramatic late twist left the two parties no choice but to pick up negotiations again last night, with discussions continuing deep into the evening. However, the meeting was adjourned without agreement and will instead continue in Brussels this morning. It is hoped a deal could still be reached before Eurozone finance ministers meet at 11am BST this morning.
Business confidence in Germany fell across the board according to the closely watched monthly survey from the IFO. The business climate index dropped from 108.5 in May to 107.4 in June, while both the expectations and current assessment indices also declined more than forecast, with the recent drawn out discussions over Greece’s debt likely to be the catalyst.
Consumer confidence data released in Germany this morning may move the Euro somewhat, although attention will no doubt be on Greece and whether a last minute deal can be agreed with its creditors.
The Greenback continued its rally yesterday, having risen every day so far this week in trade weighted terms. The US Dollar index ended the London trading session 0.2% higher.
The main headline in the US yesterday came from the US Bureau of Economic Analysis which, as expected, revised upwards its growth figures for the first quarter, from the dismal -0.7% to a much more respectable -0.2% on an annualised basis. Much of this upward revision was accounted for by a stronger pace of consumer spending then was originally anticipated, which was revised upwards to 2.1%, from 1.8% last month. Yesterday’s data will bode well for overall 2015 growth, especially considering we’ve already seen a noticeable improvement in economic performance in the second quarter of the year. It will provide the Federal Reserve more reason to hike interest rates for the first time since 2006.
Today will another busy day of data releases in the US economy. Jobless claims at 1.30pm will be followed by service sector growth at 2.45pm, both London time.
Rest of the world
Brazil’s central bank signalled it may be set to increase interest rates after further, despite downgrading its inflation expectations at its quarterly inflation report.
By contrast, the Turkish central bank suggested it would keep rates on hold for longer, until it sees a significant improvement in their inflation.