Single currency stable despite Greek 'No' vote

Enrique Díaz-Álvarez07/Jul/2015Currency Updates


A lack of data in the UK was not enough to prevent a strong Sterling rally yesterday afternoon. The UK currency appreciated by 0.45% against the US Dollar, although ended the London trading session 0.25% lower versus the single currency.

Monday proved to be a quiet start to the week in the UK as far as economic indicator data was concerned. We did see the release of the latest UK new car sales, which skyrocketed to its fastest rate on record in June. However, attention among traders was solely on Greece and speculation surrounding announcements later in the week in Britain. On Wednesday, George Osborne will be announcing his latest budget, while on Thursday the Bank of England are expected to announce that they are keeping interest rates unchanged once again at 0.5%.

Today looks set to be a busy day in the UK economy, with a number of economic releases likely to cause volatility in Sterling. This morning, the Office for National Statistics will be announcing the latest industrial and manufacturing production figures. This will be followed by the National Institute of Economic and Social Research GDP growth estimate for the three months to June, at 3pm this afternoon.


Despite a sharp Euro decline late on Sunday night fuelled by the rejection of bailout terms at the Greek referendum, the Euro proved resilient during London trading yesterday, ending 0.2% higher versus the US Dollar. The single currency ended trading just shy of Friday’s close.

Eurozone finance ministers claimed that they expected new proposals from Greece following Sunday’s referendum, although Angela Merkel again suggested there was “no basis” for talks. Meanwhile, Germany’s Finance Minister warned that any unconditional debt write off in Greece would destroy the Euro. Earlier, in a surprise announcement outspoken Greek Finance Minister Yanis Varoufakis tendered his resignation, to be replaced by negotiator Euclid Tsakalotos. This is expected to smooth talks and remove an obstacle to a potential deal to keep the country in the Eurozone.

Economic data today, including German industrial output and France’s trade balance, will once again be mostly overlooked as focus remains on Greece. The European Union will be holding an extraordinary summit at 7am UK time, followed by a meeting of Eurozone finance ministers later in the day. According to reports, Alexis Tsipras is set to present fresh proposals.


The US Dollar appreciated against the vast majority of emerging market currencies yesterday, although losing ground on the Euro, Pound, and Yen meant the US Dollar index declined by 0.2% during the course of London trading.

The pace of growth in the non-manufacturing sector of the US economy ticked higher last month according to the latest PMI from the Institute of Supply Management. Despite falling marginally short of expectations the index increased to 56.0, from 55.7, although is still hovering around a yearly low. According to the report, an increase in new orders was offset by a decline in the sectors employment index for the second consecutive month. In a similar survey from Markit, an updated revision of the services PMI confirmed that service sector growth slowed last month to 54.8, indicating growth of around 3% in the second quarter. Meanwhile, the labour market conditions index from the Federal Reserve, a broad indicator of conditions in the labour market, declined slightly in June, down from a reading of 0.9, to 0.8.

Developments in the US are likely to take a backseat once again. Signs of Greek contagion across markets could prove to be a US Dollar positive. Focus will also shift to Wednesday, and the release of the Federal Reserve’s meeting minutes.

Rest of the world

The Kenyan Shilling weakened to a three-and-a-half year low yesterday, driven lower by worries about the country’s current account deficit. Meanwhile, the South African Rand depreciated by over half a percent following Greek concerns, given the country’s dependence on exports to the Eurozone.


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.