Hold on to your haloumi…!

June 18th: Highlights

• Positive UK Retail Sales
• US CPI data +0.4%
• Positive Philly Fed Index data
• Greece continues to make waves

Sterling Comment

Yesterday’s retail sales data beat forecasts, despite posting a slowdown in growth from April, rising 4.6%. This helped Sterling hold on to gains made after Wednesday’s positive earnings data and as this is an inflationary indicator, the data adds to the debate surrounding the UK rate hike. UK public sector borrowing also decreased £2.2 billion against the last financial year.

Sterling strengthened further against the euro and seems to have found support over 1.40.

Cable also strengthened on the back of the data, but the rates pulled back a little in the afternoon session. Currently GBP/USD is around 1.5850.

Greece

And so it goes on… Market volatility continues to be fuelled by Greece and the speculation (and fear) surrounding the debate of will they/won’t they default. Rumours of a possible Greek deal circulated late in yesterday’s trade, but the meeting ended with no agreement. Again.

IMF boss Christine Lagarde said there is ‘no period of grace’ over the debt repayment deadline. And that Greece would be in default it did not make the €1.6bn payment due at the end of the month.

More than €2bn of ‘capital flight’ has now been reported. There is an understandable appetite to get private funds out of the Greek banks. Hopefully not overlooking the benefit of comparing rates when transferring funds to other currencies, but these are desperate times. If only there was a neat little platform where they could aggregate prices from a number of regulated currency firms…!

But more seriously, with default becoming more prominent, an emergency meeting has been called for Monday as it sounds like there is a strong chance that the Greek banks may not have sufficient funds to operate next week. The ECB may have to look at ELA limits again, but at what point will the central bank draw the line and stop throwing good money after bad?

One solution that is being proposed (by Greece) is for the European Stability Mechanism to be employed. The ESM could cover the Greek repayments and then Greece would work out a manageable repayment scheme to pay back the bailout fund. Sounds a little like that Ocean Finance advert, but where the debt consolidation is at an international level. If this route gains any traction, let’s hope they check the APR before signing.

Global Comment

The main event yesterday was when the FOMC took centre stage. The market is looking at September as the earliest the Fed is likely to There was fairly positive US data when the Philly Fed Manufacturing Index beat forecasts and CPI data posted the largest monthly increase in more than two years (0.4%). Today, the US will post initial jobless claims but little reaction is expected outside of the Greek saga, which is causing a lot of tension in the market today.

Have a great day!