Finally a Greek resolution?

June 3rd: Highlights

• Aussie GDP beats forecasts
• UK/EU PMI services mixed
• ECB Rate decision
• US ADP employment change
• US ISM Non-manufacturing

Sterling Comment

A mixed day for sterling yesterday saw the currency reverse its recent losses suffered against the US dollar, ending the day at the highest level since last week. However GBP posted losses against the euro for the fifth day running.

The IMF report that the UK can afford to live with its high debt burden “forever”, suggesting that some countries, Britain included, can afford to live with high debt piles because borrowing costs are low and there is enough of a cushion to withstand adverse changes in wider market conditions.

Overnight the BRC reported retail prices fell 1.9% in the last 12mths, due to supermarket price wars and lower costs of fresh produce. Retail prices like this will add to the lower inflation outlook, adding support to those believing there will be no UK interest rate movement any time soon.

Greece

The Dollar lost ground yesterday as rumours spread of an acceptable deal on the table that Greece would sign. It seems that ‘buy rumour/sell fact’ drove the market because reports this morning suggest Greek ministers are heading to the meeting with a deal proposal of their own. Again. This time it includes ‘concessions that will be difficult’ though. We’ll see.

Global Comment

The Euro hit a 2-week high against the USD on the reaction to the Greece deal and a positive CPI reading from the Eurozone. Consumer prices rose for the first time since November. This comes ahead of the ECB meeting today.

The Eurozone will be the main focus today with the ECB rate decision and press conference. No change is expected, so the press conference will be scrutinized for clues on their views of the economic performance and the effectiveness of QE. Mario Draghi will probably receive questions on Greece and will want to be optimistic over Europe, but not to the point that he drives the single currency higher. A fine balance to strike.

Thailand announced the fifth consecutive month of deflation, which caused the THB to lose just under 1% against GBP yesterday.

Following rate cuts in January and March, the Reserve Bank of India cut interest rates by a further 0.25% to 7.25%.

Today, we saw Aussie GDP beat expectations pushing AUD higher across the board. Service PMI readings from the UK & Europe were fairly uneventful (slightly better for UK, slightly worse for EU) and we’ll get the full-house when the US follows this afternoon.

Have a great day!