Sterling soared to trade just over the 1.40 handle yesterday, slipping slightly this morning back under the key psychological level, as selling pressure on the euro increased. As we move nearer whether the Greeks are bailed out or not, investors and unwilling to hold onto euros ahead of a key date of June 5th. Against the dollar, we also saw some sterling strength as the $1.55 handle was taken back, after fed minutes released yesterday saw expectations of June rate hike by the Fed disappear. Ahead in the day, the UK retail sales figure for April is likely to become the main driving force behind the GBP/USD pair. Further triggers are seen in the US session – weekly claims, existing home sales, and regional manufacturing indices.
The single currency saw heavy selling pressure yesterday as we saw EUR/USD fall below the $1.11 handle, more than a two week low, and GBP/EUR trade over the 1.40 handle, a week low for the euro. This week has not been good for the 19 nation currency, with German ZEW data disappointing on Tuesday, and the ticking time bomb in the form of the Greek issue, which looks to be getting closer to zero hour, otherwise known as June 5th. Greek Finance Minister Varoufakis said that a deal between the country and its lenders is targeted for the beginning of June. Varoufakis also stated that if they are able to pay the IMF debt alongside wages and pensions in June they will pay it, but if they cannot then pensions and wages come first. A game of brinkmanship continues between the Greek Left wing Syriza party and the EU authorities, with the euro’s value in the balance.
The dollar was lower against the yen in Asia trade Thursday, with its upside capped by profit taking and selling by Japanese exporters after a recent rally that brought the greenback to a two-month high. Against the euro we saw the $1.11 handle broken as the single currency continues to be under pressure, and cable recovered somewhat to push GBP/USD back through the $1.55 level. The Federal Reserve’s minutes for April released overnight showed the central bank officials doubted they would be ready to raise short-term interest rates by midyear. Investors have already shifted their focus to how was growth in Q2, and the currency market has started factoring in a U.S. economic rebound and will be watching closely on U.S. data such as weekly jobless claims and the Philly Fed business outlook for May due out later in the day. The dollar’s steady tone will likely continue but it depends on how these readings turn out. It’s possible that the dollar will gain further momentum later in the day following an upbeat reading from the U.S. data.