Sterling rose over 1 percent against the euro on Monday, on track for its biggest daily gains in two months, as the single currency weakened broadly after Greece and its European creditors reached agreement on a new debt deal for Athens. With no major UK economic data releases, events or policymaker speeches yesterday, the pound was largely at the mercy of the euro’s fluctuations. Traders bet that the agreement will mean monetary policy differentials will weigh on the euro again, with the European Central Bank continuing its 1 trillion euro bond-buying programme and the U.S. Federal Reserve inching closer to raising interest rates. This pushed the euro down 1.3 percent against sterling to 1.4079, a one-week low. Against the dollar, the pound was up 0.1 percent to $1.5540. The Bank of England kept its benchmark interest rates at the record low of 0.5 percent last week as policymakers grapple with how to balance Britain’s improving wage growth against more ominous signals from the global economy. Strategists are split over when (if?) the central bank will begin increasing rates, although the consensus is for the middle of next year. The pound may take its cue from UK inflation figures on which are released later today and earnings growth data on Wednesday.
The euro fell broadly on Monday on fading optimism that Greece can secure more funding to stay afloat as its European partners demanded tough reforms from the heavily indebted country which is teetering on the verge of bankruptcy. The single currency fell more than 0.5 percent against the dollar to $1.1090 according to Reuters data, as Greece’s 18 euro zone partners demanded it push legislation through parliament before starting negotiations on a third bailout programme. he euro shed 0.3 percent to 135.45 yen EURJPY=R and eased to around 1.0425 Swiss francs EURCHF=R from 1.0480 francs late on Friday as ongoing uncertainty about Greece’s future in the euro zone prompted investors to dump the euro for currencies considered to be safe havens. The euro reversed gains made late last week, when the currency rose to $1.1215 as investors bet that Athens would forge a debt deal with its European creditors, while a rebound in Chinese shares had prompted demand for riskier assets. But as euro zone finance ministers failed to reach a final agreement on a bailout package at the weekend meeting amid fraying tempers among members, markets braced for more uncertainty in the coming days. Analysts said they expected the euro to bob around the $1.10-$1.12 region as investors waited to see whether Greek Prime Minister Alexis Tsipras would be able to pass the proposed austerity package amid opposition from his leftist coalition.
The dollar strengthened against the yen and euro on Tuesday after Greece finally agreed to a debt deal with its creditors, allowing market focus to shift back towards U.S. and European yield differentials. The greenback performed well against its Japanese peer, which lost its safe-haven appeal with the worst-case-scenario of Greece exiting the euro seemingly averted. The dollar was steady at 123.46 yen after touching a 12-day high of 123.74 yen, having pulled away from a near two-month low of 120.41 struck last week. The U.S. currency also stood tall against the euro. With the Greek debt saga off centre stage, the spotlight returned to when the Federal Reserve will begin hiking interest rates. In contrast, the European Central Bank and the Bank of Japan are seen continuing with their super easy monetary policies for the foreseeable future. Dollar bulls had been given some fodder after Fed Chair Janet Yellen said Friday she expects a rate hike at some point this year – comments partially drowned out by the weekend’s Greek debt negotiations. Some focus will shift to U.S. retail sales data due later in the session, which would give investors a chance to see if fundamentals are backing up Yellen’s views.