Sterling rose against the euro yesterday, helped by UK house-price data and growing concerns about the risk of Greece exiting the euro zone. The euro was weak across the board with Athens stuck in negotiations with its euro zone partners and the International Monetary Fund over reforms required by its lenders to unlock remaining bailout funds as it is rapidly running out of cash. On Monday, property website Rightmove said asking prices for homes on sale in England and Wales hit an all-time in the month to early April, pushed up by a fall in the number of properties on the market. It echoed other surveys which have suggested that house price growth in Britain is picking up again. UK political uncertainty was not currently acting as much of a drag on the pound. Still there is an element of caution as most polls show the Conservatives and the Labour Party neck and neck, meaning a hung parliament is likely. A strong showing by smaller parties such as the Scottish Nationalists also makes it hard to predict what kind of stable government can be formed.
Europe looks set for a relatively mixed open on Tuesday as concerns of a Greek default continue to weigh on sentiment following the government’s decision on Monday to call in all public sector cash reserves. The move by the government to effectively confiscate cash reserves from public sector purses throughout Greece is very worrying for two reasons, it reeks of desperation and gives the impression that they are not optimistic on a deal being reached on reforms. It’s believed that this extraordinary measure will raise just over €2 billion which will buy the government a little more time. We will get economic sentiment readings from ZEW for Germany and the euro zone shortly after the European open. Both are currently seen rising in April to 55.5 and 63.7, respectively, probably largely helped by the weakness in the euro. The Greek situation could weigh on sentiment a little as a “Grexit” would have an impact on the wider eurozone economy, whether we want to accept it or not.
The dollar edged higher against its peers this morning, drawing support as the euro was pressured by increasing worries that Greece could default on its debt and eventually exit the single currency. Athens is in negotiations with its euro zone partners and the International Monetary Fund over reforms required to unlock remaining bailout funds before it runs out of cash and loses its ability to repay debt.