Greece awaits crucial EU summit on Sunday

Enrique Díaz-Álvarez10/Jul/2015Currency Updates


Cable traded within a narrow band for much of the day yesterday, with Sterling ending the London trading session 0.1% lower versus the Dollar.

The Pound recovered from its one month low yesterday, with the currency gaining some support from Wednesday’s budget, which in the end turned out to be not as fiscally tight as many investors had anticipated. As expected there were no surprises at the latest Bank of England monetary policy meeting, with rates kept at hold for another month at 0.5%. The announcement was once again a non-event, with the central bank also maintaining the level of its quantitative easing programme, known as the Asset Purchase Facility, constant at £375 billion. However, given a strong labour market, improved growth and rising wages far above inflation, we still expect the Bank of England to start hiking rate in the first quarter of next year. This, despite words last week from Mark Carney, who claimed events in Greece could present risks to the UK economy.

In the UK this morning, the Office National Statistics will be releasing the latest trade balance data for Britain, in the only major data release of the day.


The Euro continued to remains mostly unfazed by events in Greece yesterday, although ended lower against the US Dollar by 0.6%.

Despite voting overwhelmingly against last Sunday’s proposals from creditors, it was reported yesterday that Prime Minister Tsipras was planning 12 billion Euros worth of tax rises; the worst dose of austerity in Greece so far. Meanwhile, President of the European Central Bank Mario Draghi voiced unusual doubts about the chances of rescuing Greece from its current debt crisis. Traders will await Sunday’s summit, set to include all 28 EU members, which is being billed as Greece’s final opportunity to stay in the Euro.

Earlier in the day, the trade balance in Germany was released. The balance continued to swell un-expectedly in May, reaching a fresh record high of 22.8 billion Euros, an encouraging sign for eco-nomic growth in Europe’s largest economy. The highest trade surplus since records began in 1991 came about following a 1.7% increase in exports, far outpacing the 0.4% rise in imports over the same time period.

Focus remains on Greece ahead of Sunday’s crucial EU summit. Germany’s wholesale price index and industrial output data in France will also be worth noting this morning.


The US Dollar appreciated against most of its major counterparts yesterday, despite weak labour data, to end the day 0.4% higher against its trade weighted basket of currencies.

The weekly jobless claims figures disappointed expectations somewhat yesterday, increasing well above forecast last week. Initial jobless claims increased by 297,000, its highest since as far back as the week of 28th February, after economist had anticipated a 275,000 increase. However, claims are likely to have been boosted by seasonal adjustment problems triggered by the Independence Day holiday on 4th July, and so claims are expected to revert back to around the 280k range in the coming weeks. In the same report, continuing jobless claims, which runs on a one week lag, also increased unexpectedly, rising to 2.334 million from a revised 2.265 million.

Today will be a mostly quiet end to the week in the US economy, with few announcements of any note. Federal Reserve Chair Janet Yellen will, however, be making a speech on US economic outlook in Cleveland at around 5pm UK time.

Rest of the world

The International Monetary Fund downgraded its forecasts for global economic growth yesterday, to 3.3% from the 3.5% it predicted back in April. The IMF highlighted first quarter weakness in the US economy, although expects prospects for next year to remain undimmed, despite Greece’s debt crisis.


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.