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Euro falls after Greek proposal rejected by European Commission

EUR

The euro weakened on Tuesday after reports that the European Commission rejected a document detailing a list of reforms proposed by the Greek government to help negotiate a settlement with international creditors.

The document was rejected by officials in Brussels only hours after it was sent, according to a source in the Commission; as its reforms did not go anywhere near far enough in addressing creditor concerns about how it would generate a sufficiently high budget surplus and cut public spending.

Another major point of disagreement not addressed by the proposals was pension reform, which has become an untouchable issue due to the government’s election promise to shield pensions from austerity cuts.

Tuesday’s reports followed on from negative news on Friday when Alexis Tsipras called creditor proposals “absurd” and on Monday when Angela Merkel said: “there isn’t much time left.” Recent delays have revived concerns the country could default. At the end of the month it must pay back a .1.6bn loan to the IMF. The next important meeting is on Wednesday (tomorrow) when Tsipras will meet Merkel and Hollande for talks.

Today saw the release of Euro-zone GDP forecasts for the 1st quarter, which came out at 1.0% yoy and 0.4% qoq, in line with estimates.

USD

The dollar was marginally lower against a basket of currencies at the time of writing on Tuesday.
An unexpected rise in Wholesale Inventories indicating that unsold stock was piling up may have been the catalyst for the greenback’s underperformance – coming as it does only two days before Retail Sales, which are forecast to show a strong rise of 1.2% – albeit a month later – in May from 0.0% previously.

Traders will now be keenly anticipating Thursday’s Retail Sales news in order to determine the impact of the Inventory rise. A disappointing figure could increase concerns about a slow-down in consumer spending which would impact very negatively on the dollar as it is a central concern of several FOMC voting members.

Wholesale Trade Sales showed a rise of 1.6% in May mom, from -0.3% in April, beating the 0.6% forecast.

Employment data continued to be strong, with JOLTS Job Openings showing a rise to 5376k in April from 5109k when it had been expected to fall.

GBP

The pound rose on Tuesday after Trade data came out better-than-expected, showing a narrowing of the trade deficit in April.

The Trade Balance came out at – 8.561bn from -10.705bn previously when it had been expected to narrow to -9.950bn. This upside surprise helped support the pound.

Total Trade Balance came out at -1.202bn from -3.093bn previously, when it had been expected to narrow less to -2.6bn.

Trade Balance Non-E.U came out at -2.094bn versus -3.429bn previously, beating analyst’s estimations of a -3.0bn result.

Exports rose 4.8% versus 1.5% prior and Imports fell -4.8% versus 2.2% previously.

Although the figures looked good for the U.K economy, critics were quick to point out that the 3-month-on-3-month data was not nearly as good, with Exports increasing by 0.0% versus 0.3% previously and Imports by 2.1% vs 2.1% prior.

JPY

The yen strengthened slightly versus the dollar on Tuesday as the glow of the jobs data in the US last Friday faded and the positive GDP data from Japan was absorbed by the market.

The yen was trading at 124.15 per dollar mid way through the London trading session.

Japan’s Economy Watchers survey data released yesterday by the Cabinet Office for the current situation, dropped unexpectedly to 53.30, compared to market forecasts of a rise to a level of 54.00, while the future outlook index advanced to a level of 54.50 reversing market expectations of a drop to 54.00.

Going forward investors will be monitoring Japan’s Machine Orders data, expected to be released overnight.

EUR

The euro weakened on Tuesday after reports that the European Commission rejected a document detailing a list of reforms proposed by the Greek government to help negotiate a settlement with international creditors.

The document was rejected by officials in Brussels only hours after it was sent, according to a source in the Commission; as its reforms did not go anywhere near far enough in addressing creditor concerns about how it would generate a sufficiently high budget surplus and cut public spending.

Another major point of disagreement not addressed by the proposals was pension reform, which has become an untouchable issue due to the government’s election promise to shield pensions from austerity cuts.

Tuesday’s reports followed on from negative news on Friday when Alexis Tsipras called creditor proposals “absurd” and on Monday when Angela Merkel said: “there isn’t much time left.” Recent delays have revived concerns the country could default. At the end of the month it must pay back a .1.6bn loan to the IMF. The next important meeting is on Wednesday (tomorrow) when Tsipras will meet Merkel and Hollande for talks.

Today saw the release of Euro-zone GDP forecasts for the 1st quarter, which came out at 1.0% yoy and 0.4% qoq, in line with estimates.

USD

The dollar was marginally lower against a basket of currencies at the time of writing on Tuesday.
An unexpected rise in Wholesale Inventories indicating that unsold stock was piling up may have been the catalyst for the greenback’s underperformance – coming as it does only two days before Retail Sales, which are forecast to show a strong rise of 1.2% – albeit a month later – in May from 0.0% previously.

Traders will now be keenly anticipating Thursday’s Retail Sales news in order to determine the impact of the Inventory rise. A disappointing figure could increase concerns about a slow-down in consumer spending which would impact very negatively on the dollar as it is a central concern of several FOMC voting members.

Wholesale Trade Sales showed a rise of 1.6% in May mom, from -0.3% in April, beating the 0.6% forecast.

Employment data continued to be strong, with JOLTS Job Openings showing a rise to 5376k in April from 5109k when it had been expected to fall.

GBP

The pound rose on Tuesday after Trade data came out better-than-expected, showing a narrowing of the trade deficit in April.

The Trade Balance came out at – 8.561bn from -10.705bn previously when it had been expected to narrow to -9.950bn. This upside surprise helped support the pound.

Total Trade Balance came out at -1.202bn from -3.093bn previously, when it had been expected to narrow less to -2.6bn.

Trade Balance Non-E.U came out at -2.094bn versus -3.429bn previously, beating analyst’s estimations of a -3.0bn result.

Exports rose 4.8% versus 1.5% prior and Imports fell -4.8% versus 2.2% previously.

Although the figures looked good for the U.K economy, critics were quick to point out that the 3-month-on-3-month data was not nearly as good, with Exports increasing by 0.0% versus 0.3% previously and Imports by 2.1% vs 2.1% prior.

JPY

The yen strengthened slightly versus the dollar on Tuesday as the glow of the jobs data in the US last Friday faded and the positive GDP data from Japan was absorbed by the market.

The yen was trading at 124.15 per dollar mid way through the London trading session.

Japan’s Economy Watchers survey data released yesterday by the Cabinet Office for the current situation, dropped unexpectedly to 53.30, compared to market forecasts of a rise to a level of 54.00, while the future outlook index advanced to a level of 54.50 reversing market expectations of a drop to 54.00.

Going forward investors will be monitoring Japan’s Machine Orders data, expected to be released overnight.



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