The pound was sold off in currency markets yesterday as mixed messages from the ongoing Greek saga continued to push the majors one way then another, with another deadline day now set for Sunday. This gave the euro a slight reprieve, pushing GBP/EUR back down under the 1.40 handle. Weaker than expected UK manufacturing production data also weighed on sterling as the expected number of 0.1% didn’t appear, instead being replaced with a negative -0.6% figure. Overnight we also saw UK shop prices slide 1.3% in June following the 1.9% decline in May. This all comes ahead of yet another annual budget release (this is an additional budget following the elections 2 months ago). Sterling may be pushed one way or another, depending on how business friendly the budget is perceived to be.
We all knew it, yet another deadline day came and went in the sorry state of what has become a farce with regards to the eurozone trying to sort out the Greek issue. Now we have another deadline day, well 2 for 1 really. Greece now has until Thursday to submit its final final deal to its creditors, so the lenders can then meet on Sunday to discuss whether to deal the Greeks in or deal them out. This managed to support the single currency somewhat yesterday and halt its recent slide against the majors. As a sweetener for such a deal, leaders raised the possibility of some short-term financing to help Athens make a July 20 payment and — most important for Greek Prime Minister Alexis Tsipras — action down the road to relieve Greece’s crushing debt burden. Obstacles to an agreement that keeps Greece in the eurozone remain high, however. Most notably, the policy overhauls and budget cuts demanded go beyond those that were resoundingly rejected by Greek voters in a referendum last weekend.
The dollar rose to fresh 1-month highs against a basket of other major currencies on Tuesday, as demand for the safe-haven greenback remained supported as negotiations between Greece and its lenders continued. EUR/USD dropped 0.59% to 1.0992 as Greek Prime Minister Alexis Tsipras was meant to present new proposals to euro zone finance ministers by end of play yesterday. Of course, that didn’t happen so a slight pull back in the euros favour has been seen. The pound was also lower, with GBP/USD down 0.70% to 1.5498. Elsewhere, the dollar was steady against the yen, with USD/JPY at 122.51 and higher against the Swiss franc, with USD/CHF gaining 0.41% to 0.9465. The Australian and New Zealand dollars were weaker, with AUD/USD down 0.77% at six-year lows of 0.7441 and with NZD/USD sliding 0.64% to a fresh five-year trough of 0.6643. The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.53% at 96.94, the highest level since June 5.