The pound strengthened the most in a week against the euro, extending a quarterly advance that’s already seen it exceed analysts’ forecasts for year-end. Powered by the U.K.’s improving economy and prospects of an interest-rate increase, sterling has climbed versus all of its major counterparts since March. It advanced through 70 pence per euro for the first time since 2007 on Monday as the Greek crisis escalated. That’s the level strategists surveyed by Bloomberg see the pound reaching by the end of 2015. “What drives currencies is perception of where things are going,” said Gavin Friend, a strategist at National Australia Bank Ltd. in London. “And the U.K. right now is up there with the U.S. as the only two nations who appear to have central banks that are teeing markets up for slightly less accommodative monetary policy.” Consumer confidence in the U.K. jumped to its highest level in more than 15 years in June and the economy grew faster than initially estimated in the first quarter, reports showed on Tuesday. The data reinforced speculation the Bank of England will be the first major central bank to tighten policy after the Federal Reserve.
The euro edged lower against the other major currencies today after Greece became the first developed country to default on the International Monetary Fund as its bailout program expired. The IMF confirmed that the Greek government failed to make a scheduled €1.6 billion loan repayment by close of business yesterday. The fund said Greece can now only receive further funding after its arrears are cleared. Greece asked for a last-minute repayment extension on Tuesday, which the fund said it will consider “in due course.” A default by Greece wiIl add to fears over the country’s solvency and fuel doubts over the condition of Greek banks and the collateral they use for European Central Bank loans. Earlier yesterday the Greek government requested a new two-year bailout program and debt restructuring, the country’s third in five years. However the latest proposals came too late to prevent Greece’s existing bailout agreement from expiring. Euro zone finance ministers were to hold discussions later Wednesday to discuss the latest Greek proposals but German Chancellor Angela Merkel has ruled out further negotiations until after Sunday’s referendum in Greece. Over the weekend Greek Prime Minister Alexis Tsipras called for a snap referendum to be held on July 5 on whether to accept the terms proposed by lenders for extending the country’s bailout. European leaders have said the referendum is ultimately a vote on whether to remain in the euro zone.
The dollar remained broadly higher against a basket of other major currencies on yesterday, after data showed that U.S. consumer confidence improved more than expected in June and as an almost certain default by Greece continued to support safe-haven demand. The Conference Board reported yesterday that its index of consumer confidence rose to 101.4 this month from a reading of 94.6 in May, whose figure was revised from a previously reported 95.4. Analysts expected the index to rise to 97.3 in June. EUR/USD dropped 0.44% to 1.1187 after Greece requested a new two-year bailout program, just hours ahead of a deadline for what looked to be an almost certain debt default by Athens. The Greek government requested a new bailout from the European Stability Mechanism to cover the country’s financial need for the next two years, which would run alongside debt restructuring. Greece’s existing bailout program officially expires at midnight and €1.6 billion loan repayment to the International Monetary Fund is due at the same time. Without a rescue package in place Athens will almost certainly fall into arrears. Earlier in the day Greek Finance Minister Yanis Varoufakis said Athens would not make the deadline for the repayment.