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Greenback falters as yields dip on Greek talks breakdown

USD

The dollar weakened on Wednesday as U.S yields slid following a breakdown in Greek debt talks.

The greenback shrugged off positive inflation data, ending the day lower against a basket of currencies, as Grexit fears dominated market sentiment.

Positive data showed a rise in two of the key metrics used by the Federal Reserve to assess inflationary pressures: the GDP Price Index and Personal Consumption.

The GDP Price Index in the first quarter showed a rise 0.0% from -0.1% previously, when analysts had forecast -0.1% again.

Personal Consumption meanwhile rose by 2.1% from 1.8% previously, when it had been expected to rise by a more muted 1.9% in Q1.

Oil prices rose after Department of Energy figures showed a higher-than-expected fall in Inventories.

Q1 GDP data, meanwhile matched analyst’s estimates of -0.2%, climbing from a -0.7% print previously; Personal Consumption Expenditure increased by 0.8% qoq in the first quarter, as forecast.

EUR

The euro rose marginally on Wednesday despite negative news, as traders adjusted their positions,, harvesting profits from short trades which had yielded returns over previous days.

Proposals put forward by Alexis Tsipras’s administration were rejected by creditor institutions leading to a continued dead-lock in debt-for-reform negotiations.

The IMF said proposals did not go far enough in making public spending cuts and relied too heavily on higher taxes, including a one-off levy on businesses and a rise in Corporation tax to foot the bill, policies, which it argued would slow growth down eventually, leading to a decline in revenue over time.

Another source of disagreement surrounded the issue of debt restructuring, which the Greeks want in order to lower their repayments, however, creditors are against a further hair-cut.

Finally, creditors want deeper cut to Greece’s relatively high defence budget, which is the highest as a ratio to GDP in the euro-zone. The problem for Tsipras is that his coalition partners are right-wing nationalists who’s representative in the cabinet holds the Defence ministry portfolio, and they will be dead against further cuts to the defence budget.

On the data front business sentiment data from the IFO Institute fell across the board in June, with Current Assessment down to 113.1 from 114.3, Business Climate down to 107.4 from 108.5 and Business Climate down to 107.4 from 108.5.

GBP

The pound weakened overall on Wednesday, after mortgage data from the British Banking Association (BBA), showed a rise, but not as high as had been forecast.
BBA Loans for House Purchase in May increased to 42530 from 42020 previously, when a greater increase to 42530 had been expected.

Despite the lacklustre data Mortgage data overall remains buoyant, with total Mortgage Approvals reaching a year high of 68.1k in April.

JPY

The BOJ minutes were released on Wednesday and included the comment “some members, noting the fact that April consumer price index for Tokyo had been relatively weak said attention should be paid to what implications such weakness would have for nationwide prices”.

Some members of the board appeared to be worried about weak consumer price gains in Tokyo, others believed that the underlying trend remained in line with the central bank’s outlook.

The BOJ is likely to reach its 2.0% inflation target around the first half of fiscal 2016, according to the minutes of the May meeting. Policy makers also warned that industrial production could waken in the short term, but overall the economy would remain in recovery mode supported by strong domestic demand.

Economists expect the world’s 3rd largest economy to slow in the April-June quarter after stronf 3.9% expansion at the beginning of the year.

Data due on Friday is likely to show Tokyo’s core CPI rose an annual 0.1% in June, while nationwide core CPI is forecast to be unchanged.

The Yen continued to weaken on Wednesday trading in the centre of its medium term range at 124.29 per dollar half way through the London session.

USD

The dollar weakened on Wednesday as U.S yields slid following a breakdown in Greek debt talks.

The greenback shrugged off positive inflation data, ending the day lower against a basket of currencies, as Grexit fears dominated market sentiment.

Positive data showed a rise in two of the key metrics used by the Federal Reserve to assess inflationary pressures: the GDP Price Index and Personal Consumption.

The GDP Price Index in the first quarter showed a rise 0.0% from -0.1% previously, when analysts had forecast -0.1% again.

Personal Consumption meanwhile rose by 2.1% from 1.8% previously, when it had been expected to rise by a more muted 1.9% in Q1.

Oil prices rose after Department of Energy figures showed a higher-than-expected fall in Inventories.

Q1 GDP data, meanwhile matched analyst’s estimates of -0.2%, climbing from a -0.7% print previously; Personal Consumption Expenditure increased by 0.8% qoq in the first quarter, as forecast.

EUR

The euro rose marginally on Wednesday despite negative news, as traders adjusted their positions,, harvesting profits from short trades which had yielded returns over previous days.

Proposals put forward by Alexis Tsipras’s administration were rejected by creditor institutions leading to a continued dead-lock in debt-for-reform negotiations.

The IMF said proposals did not go far enough in making public spending cuts and relied too heavily on higher taxes, including a one-off levy on businesses and a rise in Corporation tax to foot the bill, policies, which it argued would slow growth down eventually, leading to a decline in revenue over time.

Another source of disagreement surrounded the issue of debt restructuring, which the Greeks want in order to lower their repayments, however, creditors are against a further hair-cut.

Finally, creditors want deeper cut to Greece’s relatively high defence budget, which is the highest as a ratio to GDP in the euro-zone. The problem for Tsipras is that his coalition partners are right-wing nationalists who’s representative in the cabinet holds the Defence ministry portfolio, and they will be dead against further cuts to the defence budget.

On the data front business sentiment data from the IFO Institute fell across the board in June, with Current Assessment down to 113.1 from 114.3, Business Climate down to 107.4 from 108.5 and Business Climate down to 107.4 from 108.5.

GBP

The pound weakened overall on Wednesday, after mortgage data from the British Banking Association (BBA), showed a rise, but not as high as had been forecast.
BBA Loans for House Purchase in May increased to 42530 from 42020 previously, when a greater increase to 42530 had been expected.

Despite the lacklustre data Mortgage data overall remains buoyant, with total Mortgage Approvals reaching a year high of 68.1k in April.

JPY

The BOJ minutes were released on Wednesday and included the comment “some members, noting the fact that April consumer price index for Tokyo had been relatively weak said attention should be paid to what implications such weakness would have for nationwide prices”.

Some members of the board appeared to be worried about weak consumer price gains in Tokyo, others believed that the underlying trend remained in line with the central bank’s outlook.

The BOJ is likely to reach its 2.0% inflation target around the first half of fiscal 2016, according to the minutes of the May meeting. Policy makers also warned that industrial production could waken in the short term, but overall the economy would remain in recovery mode supported by strong domestic demand.

Economists expect the world’s 3rd largest economy to slow in the April-June quarter after stronf 3.9% expansion at the beginning of the year.

Data due on Friday is likely to show Tokyo’s core CPI rose an annual 0.1% in June, while nationwide core CPI is forecast to be unchanged.

The Yen continued to weaken on Wednesday trading in the centre of its medium term range at 124.29 per dollar half way through the London session.



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