The ball’s in your court

June 15th: Highlights

• Volatility increases across most currency pairs
• Greek PM accuses creditors of being politically motivated
• EUR/USD rallies above 1.13 this morning

Sterling Comment

GBP/USD gradually pushed higher over the past 24 hours. Yesterday, rates dipped below 1.55 but Sterling benefited from poor US economic data and Cable trade through 1.56. It opened this morning around 1.5610. Cable is experiencing increased volatility with the uncertainty over Greece and the Fed’s plan for a rate increase.

GBP/EUR is trading steady at the 1.38 mark, but if you exposed to the Single Currency, keep a watchful eye the evolving Greece situation. It will certainly affect exchange rates further as things play out.

UK releases inflation and house price data today. The forecast of a +1% would end of the UK’s brief affair with negative inflation and could well push Sterling higher. Any such move may be tapered by the looming Fed meeting, but we’ll see what the data brings.

Greece

So today the debate has moved on to ‘whose court the ball is in’. According to City AM, Mario Draghi claimed, “the ball lies squarely in the camp of the Greek government to take the necessary steps”, and they quote a Greek spokesman as saying “They keep saying the ball is in Greece’s court, but it is not, it’s always been on them. The measures they are demanding are inapplicable.” So at least both sides to still seem to be playing ball ahead of their next meeting on Thursday, even if it’s unclear if anybody is winning.

The Greek PM pointed his finger at creditors for behaving in a politically motivated manner. The European Commissioner responded to say that Greece will be in a state of emergency come July 1st if no agreement has been met with it’s creditors. The consistency of the he said/she said tittle-tattle continues.

As expected, the market remains cautious. No stark reminder is needed that a Grexit would change the EU as we know it and enter uncharted territory. The increase in EUR/USD volatility reflects this uncertainly very well.

Global Comment

Weak US data was released yesterday including The Empire States Manufacturing Index and Industrial Production both fell short of forecasts. Regardless, the US Dollar Index (a measure of strength against a trade weighted basket of six major currencies) was up 0.19% to 95.25.

EUR/USD rallied above 1.13 earlier this morning, having been trading just 24 hours ago down at 1.1190. As mentioned above, weak US economic data has certainly helped. The paid is now trading around 1.1266.

Today we’ll see the German ZEW Economic sentiment figure, which is expected to fall, reflecting the slowdown from the EU’s biggest economy.

Later from the US, we have building permits and housing starts but investors are staying cautious ahead of Wednesday’s Fed monetary policy announcement, which is going to be closely observed for any indications on timing of interest rate hikes.

Both GBP/AUD and GBP/NZD have traded a fairly narrow range over the last 24 hours and opened up this morning at 2.0155 and 2.2355 respectively.

Have a great day!