A mixed day for sterling yesterday saw a recovery against the dollar but losses posted against a rallying single currency. the euro has been given a lifeline as such, as market speculators assess whether a deal will be reached for Fridays deadline, and it seems at present, investors are cutting the euro some slack, but how long will it be until they actually cut the whole line? What didn’t help the pound’s point of view was very disappointing UK economic data which was released in the form of UK services PMI numbers. What was expected was a healthy figure of 59.2, what we got was a weak 56.5, as expansion in the services sector slowed down to the lowest level since December last year. It was not all bad news for the pound however, as a sell off in the value of the US currency saw cable recover, with GBP/USD clawing back over one and a half cents to push the currency pair back over the $1.5350 level.
A welcome boost for the euro yesterday saw it recover against the majors as rumours of deals on the table continue. Technically, the EURUSD bounced sharply, more that 3% in the last two sessions, helped by a better-than-expected retail sales in the Eurozone, good perspectives about Greece and the increase of inflation expected by the ECB for the next months. This recent data is addressing the euro to the next resistance, placed at 1.1460, coinciding with the previous highs reached 3 weeks ago. We could say that the trend is bullish in the short term, but a few hours in currency markets is now short term. The billion-dollar question: is Greece going to repay the International Monetary Fund on time? Or will it, in the absence of a new deal with its official creditors, dare default on the global crisis lender which has joined two massive bailouts of the Greek economy? Athens is scheduled to repay $1.6 billion euros ($1.8 billion) to the IMF in four steps between now and June 19. The first payment is around 300 million euros due on Friday – hold onto your hats time we think!
The dollar slipped yesterday as the rumour mill regarding a bailout for Greece saw some risk put back on in currency markets. US equities held higher although gains were modest. US data impulses were mixed – ADP was in line with market estimates at +201K (f/c. +200K). The US trade deficit meanwhile narrowed to $40.9 Bln (f/c. -$44.0 Bln) while ISM non-manufacturing slipped to 55.7 (f/c. 57.0) from 57.8. The Atlanta Fed have since revised their Q2 GDP forecast to +1.1% from +0.8% on the trade figures. We also heard from Fed’s Evans who said in the his Q&A with the audience that we are getting near to a strong economy and the fact that we are talking about raising rates shows progress. Evans later added that his own view of data means it is unlikely Fed should raise rates before 2016. The Beige Book meanwhile noted US economic activity expanded during the reporting period from early April to late May and growth is expected to continue at a modest to moderate pace in several districts. In Greece, investors are awaiting any details from the meeting this afternoon between Euro Group Head Dijsselbloem, EU Head Juncker and Greek PM Tispras. Reports have suggested that the meeting will be private and officials will not be briefing press after the talks. EU spokesman Schinas warned earlier today not to expect a final agreement from tonight’s talks. Sources have since suggested that there is still not a full staff-level agreement between creditors ahead of the meeting