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Euro spikes higher on hopes of a Greek deal

EUR

The euro rose strongly on Tuesday after reports of progress in negotiations between Greece and its international creditors, which gave hope of a compromise being reached which would avoid a dreaded debt default.

A high level meeting yesterday, which included IMF’s Christine Lagarde, E.U Commission President Jean-Claude Junker, ECB President Mario Draghi, Angela Merkel and Francois Hollande resulted in a draft agreement being crafted, which was then dispatched to the Greek authorities to look at on Tuesday.

The Greek government sent creditors an updated list of economic reforms which it described as “realistic.”

Despite naysayers still arguing the gap between the two opposing camps is too wide to bridge, the news of the exchanging of documentation helped ease sentiment and increase hope of a deal sufficiently to see the euro shoot up over 2.5% on the day.

The single currency was further supported by data, which showed a higher-than-expected rise in inflation in May, with headline CPI up 0.3% – above the 0.2% expected and Core CPI rising 0.9% from 0.6% previously, when analyst’s had estimated a more modest rise of 0.7% yoy.

USD

The dollar weakened on Tuesday after a mixture of poor data and doveish commentary from Fed’s Brainard led to speculation the Fed might delay hiking rates.

U.S Factory Orders in April fell by -0.4% from 2.2% in March, when expectations had been for a more modest -0.1% fall. The March figure was upwardly revised from 2.1% however.

Commentary from voting member of the FOMC Leal Brainard, also weakened the greenback. Her tone contrasted to other members who were generally positive about the outlook for the economy and considered a hike this year as highly probable. Brainard, on the other hand, was more pessimistic, warning the slow-down might be more significant-than-expected.

She further added that when it finally happens the rate rise will be gradual. She said the economy presented a mixed picture and did not discount the possibility of drag; the benefits of cheap oil were offset by the negative impact on the oil industry and the expensive dollar. She was concerned about weak consumer spending and that exports would take a long time to recover from weak foreign demand and the strong dollar.

On a more hawkish note, however, the Fed official said that despite all these factors inflation seemed to be firming, although she would want more evidence of inflation and healing in the labour market before voting for a rise.

GBP

The pound rose on Tuesday after Construction PMI rose above expectations, continuing the trend of strong PMI after Monday’s higher-than-anticipated Manufacturing also beat forecasts.

The figures showed Construction Purchasing Manager data rising to 55.9 from 54.2 when analysts had estimated an increase to 55.0.

If tomorrow’s Services PMI also beats expectations then it could further propel the pound higher, as the Services sector is by far the most significant in the U.K economy.

Other data on Tuesday showed Net Consumer Credit increasing by 1.2bn from 1.3bn previously when it had been forecast to fall to 1.0bn. Re-mortgaging also fell to 1.7bn in April from 2.0bn previously when a lesser drop to 1.9bn had been estimated. Mortgage Approvals, however, rose by a higher-than-expected 68.1k from 61.9k previously, when it had been expected to increase to only 63.5k.

JPY

The yen strengthened over 80 points on Thursday versus the dollar trading at 123.95 late in the New York session.

Earlier today, data indicated that labour cash earnings in Japan advanced 0.9% on an annual basis,beating market expectations for a 0.3% increase. In the previous month labour cash earnings had registered a flat reading.

Overnight data showed that Japan’s monetary base climbed 35.6% yoy in May, following a rise of 35.2% recorded in May.

BOJ Governor Kuroda told reporters at a press conference today, after a meeting with Prime Minister Shinzo Abe, that it was important for currency rates to reflect economic fundamentals, but made no attempt to talk up the yen. Finance Minister Taro Aso was equally tight-lipped, saying that he will watch forex moves carefully.

Going forward investors look forward to the release of Japan’s services PMI data, scheduled for tomorrow (Wednesday).

EUR

The euro rose strongly on Tuesday after reports of progress in negotiations between Greece and its international creditors, which gave hope of a compromise being reached which would avoid a dreaded debt default.

A high level meeting yesterday, which included IMF’s Christine Lagarde, E.U Commission President Jean-Claude Junker, ECB President Mario Draghi, Angela Merkel and Francois Hollande resulted in a draft agreement being crafted, which was then dispatched to the Greek authorities to look at on Tuesday.

The Greek government sent creditors an updated list of economic reforms which it described as “realistic.”

Despite naysayers still arguing the gap between the two opposing camps is too wide to bridge, the news of the exchanging of documentation helped ease sentiment and increase hope of a deal sufficiently to see the euro shoot up over 2.5% on the day.

The single currency was further supported by data, which showed a higher-than-expected rise in inflation in May, with headline CPI up 0.3% – above the 0.2% expected and Core CPI rising 0.9% from 0.6% previously, when analyst’s had estimated a more modest rise of 0.7% yoy.

USD

The dollar weakened on Tuesday after a mixture of poor data and doveish commentary from Fed’s Brainard led to speculation the Fed might delay hiking rates.

U.S Factory Orders in April fell by -0.4% from 2.2% in March, when expectations had been for a more modest -0.1% fall. The March figure was upwardly revised from 2.1% however.

Commentary from voting member of the FOMC Leal Brainard, also weakened the greenback. Her tone contrasted to other members who were generally positive about the outlook for the economy and considered a hike this year as highly probable. Brainard, on the other hand, was more pessimistic, warning the slow-down might be more significant-than-expected.

She further added that when it finally happens the rate rise will be gradual. She said the economy presented a mixed picture and did not discount the possibility of drag; the benefits of cheap oil were offset by the negative impact on the oil industry and the expensive dollar. She was concerned about weak consumer spending and that exports would take a long time to recover from weak foreign demand and the strong dollar.

On a more hawkish note, however, the Fed official said that despite all these factors inflation seemed to be firming, although she would want more evidence of inflation and healing in the labour market before voting for a rise.

GBP

The pound rose on Tuesday after Construction PMI rose above expectations, continuing the trend of strong PMI after Monday’s higher-than-anticipated Manufacturing also beat forecasts.

The figures showed Construction Purchasing Manager data rising to 55.9 from 54.2 when analysts had estimated an increase to 55.0.

If tomorrow’s Services PMI also beats expectations then it could further propel the pound higher, as the Services sector is by far the most significant in the U.K economy.

Other data on Tuesday showed Net Consumer Credit increasing by 1.2bn from 1.3bn previously when it had been forecast to fall to 1.0bn. Re-mortgaging also fell to 1.7bn in April from 2.0bn previously when a lesser drop to 1.9bn had been estimated. Mortgage Approvals, however, rose by a higher-than-expected 68.1k from 61.9k previously, when it had been expected to increase to only 63.5k.

JPY

The yen strengthened over 80 points on Thursday versus the dollar trading at 123.95 late in the New York session.

Earlier today, data indicated that labour cash earnings in Japan advanced 0.9% on an annual basis,beating market expectations for a 0.3% increase. In the previous month labour cash earnings had registered a flat reading.

Overnight data showed that Japan’s monetary base climbed 35.6% yoy in May, following a rise of 35.2% recorded in May.

BOJ Governor Kuroda told reporters at a press conference today, after a meeting with Prime Minister Shinzo Abe, that it was important for currency rates to reflect economic fundamentals, but made no attempt to talk up the yen. Finance Minister Taro Aso was equally tight-lipped, saying that he will watch forex moves carefully.

Going forward investors look forward to the release of Japan’s services PMI data, scheduled for tomorrow (Wednesday).



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