Analysis / Daily / Finance / forex

Greek Problems Help Sterling Against Euro

One Pound

Sterling gained some ground against a broadly weaker euro on Thursday while falling back from a near-three-week high against the dollar in a market struggling for new direction after six months of political and economic jitters. Some analysts said the pound, which hit 7-year highs after last month’s election generated none of the predicted trouble in forming a government, had suffered from the lack of any hints in an annual speech by the Bank of England’s governor on when interest rates might be lifted from their historic lows. Traders said there had been minimal trading in a market made more volatile over the past two months by sharp and unexpected moves in traditionally more reliable Bund yields. In a speech at Mansion House to the City of London on Wednesday, BoE Governor Mark Carney focused on plans to clamp down on market abuse but did not comment on mstonetary policy. That was in contrast to last year, when he sparked a sharp rally in the pound by saying interest rates could rise sooner than markets expected. After a run of mixed economic data, investors are not now expecting the BoE to begin to hike rates until at least the middle of next year. And with the U.S. Federal Reserve on track for its first rate rise since 2006 in September, traders reckon the dollar is a more attractive currency than the pound. Sterling had risen as high as $1.5554 on Wednesday, its strongest since 22nd May, after data showed British industrial output grew faster than expected in April, bolstering hopes that Britain’s economy picked up speed in the second quarter. But with no fresh impetus to buy the pound it pulled away from that high on Thursday, trading down 0.28 percent on the day at $1.5498. The general thinking of currency traders seems to be that the U.S. is still at the top, sterling is in between, and the euro is at the bottom.

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The euro has fallen in early Asian trading today as a further impasse in talks over Greece’s debt obligations emerged.EUR/USD changed hands at 1.1245, down 0.13%, after reports that talks between Greece and the IMF were on hold. Officials from the International Monetary Fund hastily ended negotiations with Greece yesterday, amid a lack of progress. Greek prime minister Alexis Tsipras met with European Commission president Jean-Claude Juncker for roughly two hours on yesterday before members of the Greek bailout team left Brussels. Tsipras told reporters on Thursday afternoon that the two sides still remained far apart on a number of critical issues.”We’re working in order to bridge the remaining differences and especially the differences on fiscal and financial issues,” Tsipras said. On Wednesday, German Chancellor Angela Merkel said Greek Prime Minister Alexis Tsipras had agreed to work “intensively” with the country’s creditors in order to avoid default at the end of the month. Greece’s bailout agreement with the European Union and the International Monetary Fund is set to expire at the end of this month and it cannot make further debt repayments without a new deal.

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The dollar remained supported against a basket of other major currencies on Thursday, after data showed that U.S. jobless claims rose slightly more than expected last week, while U.S. retail sales increased more than initially anticipated in May. The U.S. Department of Labor reported on Thursday that the number of individuals filing for initial jobless benefits in the week ending June 6 increased by 2,000 to 279,000 from the previous week’s revised total of 277,000. Analysts had expected initial jobless claims to remain unchanged at 277,000 last week. Separately, the U.S. Commerce Department said that retail sales increased by 1.2% last month, beating expectations for a gain of 1.1%. Retail sales rose by 0.2% in April, whose figure was revised up from a previously reported flat reading. Core retail sales, which exclude automobile sales, rose by 1.0% in May, compared to forecasts for a 0.7% increase. Core sales in April increased 0.1%. The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.74% at 95.29. The dollar remained higher against the yen, with USD/JPY up 0.83% to 123.64, off Wednesday’s lows of 122.45. Elsewhere, GBP/USD slipped 0.28%  while USD/CHF advanced 0.53% to trade at 0.9363.

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