Analysis / Daily / Finance / forex

Brave Greeks Defy Euro Paymasters

One Pound

The pound edged higher against the U.S. dollar on Friday, after data showed that U.K. service sector expanded at a faster rate than expected this month, although gains were capped by the ongoing concerns of the Greek debt crisis. Trading volumes were thin with U.S. markets closed for a national holiday. GBP/USD hit 1.5639 during European morning trade, the session high; the pair subsequently consolidated at 1.5623, adding 0.10%. Markit research group reported on Friday that the U.K. Services Purchase Managers Index rose to 58.5 in June from 56.5 the previous month, beating expectations for an uptick to 57.4.

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The euro has regained ground today, recovering from a steep overnight decline after Greeks overwhelmingly rejected conditions for a bailout package from creditors in a referendum on Sunday. EUR/USD was last at 1.1054, off 0.51% for the day after falling to one-week lows of 1.0970 overnight. The result of the referendum has added to doubts over Greece’s future in the euro zone and deepened a standoff with its lenders. European officials have indicated that they will only continue to finance Greece in return for far-reaching economic reforms. Greek Prime Minister Alexis Tsipras welcomed the outcome of the vote and said Athens was returning to negotiations with the express goal of reopening banks, which have been shut for over a week after capital controls were imposed. Without more emergency funding from the European Central Bank, Greece’s banks are facing a cash crunch within days. The ECB was to discuss whether to maintain emergency funding for Greek banks at their current restricted level later Monday. Euro zone leaders were expected to hold a conference on Tuesday night to discuss the aftermath of the Greek referendum. In a surprise move, Greek Finance Minister Yanis Varoufakis resigned on Monday, despite the referendum results. In a statement, Varoufakis said his decision was prompted in part by “some European participants” expressing a desire for his part in any further negotiations to end. The single currency was also weaker against the yen and the pound, with EUR/JPY last at 135.4, down 0.8% after falling as low as 133.91 earlier.

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The dollar was lower against the other major currencies in holiday-thinned trade on Friday as disappointing U.S. jobs data and uncertainty ahead of Greece’s bailout referendum over the weekend clouded market sentiment. U.S. markets remained closed on Friday for the Independence Day holiday. The dollar remained on the back foot after the latest U.S. employment report tempered expectations for higher interest rates later this year.  The Labour Department reported Thursday that the U.S. economy added 223,000 jobs in June, compared to expectations for jobs growth of 230,000. Hourly earnings were flat in June, missing expectations for growth of 0.2%. The Federal Reserve has said that continued strengthening in the labour market is a key factor in deciding when to start hiking interest rates. The U.S. Dollar Index which measures the greenback’s strength against a trade-weighted basket of six major currencies, was at 96.38 late Friday, little changed for the day. For the week, the index still added 0.67%. The dollar was lower against the safe haven yen, with USD/JPY slipping 0.24% to 122.78 in late trade.

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