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    Euro loses ground as Grexit fears continue to dominate

    EUR

    The euro weakened on Tuesday after heightened Grexit fears weighed.

    The country faced repaying a 1.6bn IMF loan on Tuesday, which if it failed to repay would be seen in the eyes of many as a default, even though the IMF had said failure to pay would not technically be classed as a default, only an arrears. The deadline for payment is 6pm Washington (22.00 GMT). It is widely expected Greece will not be able to make the repayment.

    In addition, June 30 is also the day the previous Troika bailout programme will expire. So far no replacement has been found, with a consequence that the country will have no financial assistance from now on.

    In an attempt at an 11th hour deal to find a replacement for the programme Greek politicians proposed a new two year bailout deal on Tuesday, however, this was rejected by Angela Merkel, who said there would be no deal now until after the referendum.

    Over the weekend Tspiras announced a referendum to be held on Sunday to let the Greek people decide whether or not to accept the creditor’s final offer.

    On the data front, the release of Euro-zone CPI for June was awaited with much anticipation after German CPI yesterday undershot expectations leading some to expect the data for the euro-zone to show the same temporary fall back into deflationary territory. However, in the end the data came out in line with expectations, leading to no increase in weakness for the single currency.

    USD

    The dollar rose against a basket of currencies on Tuesday after Consumer Confidence increased in June to a higher-than-expected 101.4 from 95.4 previously when it had been forecast to only rise to 97.1.

    Other data included the Chicago Purchasing Manager Index, which failed to meet expectations of 50.0, after only managing to reach 49.4, instead from 46.2 previously.

    A well known gauge of the cost of family homes, the S&P/Case-Schiller Composite-20 Index, showed a slow-down to 4.91% in April, from 4.94% in the previous year, when it had been forecast to rise to 5.50%.

    The fed continues to be on track for a rate hike this year – possibly even in September according to New York Fed’s Dudley, who gave a speech on monetary policy on Friday, particularly in growth in Q’s 2 and 3 are over 2.5%.

    GBP

    The pound traded mixed on Tuesday – rising against the euro on Grexit concerns, but pulling-back against the dollar and the yen as trader’s booked profits on the recent rally.

    Sterling was broadly supported by strong data which showed the final estimate for growth in Q1 was actually a little higher than previous estimates, after it showed a rise to 2.9% yoy from 2.4% previously, and beating the 2.5% expected.

    Quarter-on-quarter, however, data only showed a slight basis point increase to 0.4% as analysts had estimated.

    Other data showed an increase in Business Investment, which gained 2.0% qoq and 5.7% yoy for the 1st quarter. Both these figures easily beat previous results.

    The Current Account failed to recover as much as had been expected, after it showed a deficit of -26.5bn against forecasts of -24.0bn.

    Index of Services and Lloyds Business Barometer, came out more or less in line with estimates, except the former on a monthly basis rose by a less-than-expected 0.2% in April versus the 0.3% investors had been waiting for.

    JPY

    The Japanese yen gathered momentum as safe haven trading pushed up the currency and even a dollar rally this morning could not halt its strengthening.

    Monday’s moves continue to highlight the degree to which investors have struggled to interpret how risks would play out in the currency markets.

    Earlier today data showed that Japan’s labour cash earnings unexpectedly advanced less than expected by 0.6% in May.

    In remarks via Reuters on Monday BOJ’s Governor Kuroda said that it had become a common understanding among central banks that unconventional monetary policy, despite lingering scepticism from the academic front, has proven to be effective. He also said that inflation was widely perceived to be ultimately a monetary phenomenon, so creation of a massive quantity of money would be a strong signal of a central bank’s commitment to fight deflation.

    He again reiterated that the BOJ’s commitment to achieving the 2.0% inflation target will never be compromised and that he was confident tha BOJ can achieve its inflation target with “unwavering determination.”

    EUR

    The euro weakened on Tuesday after heightened Grexit fears weighed.

    The country faced repaying a 1.6bn IMF loan on Tuesday, which if it failed to repay would be seen in the eyes of many as a default, even though the IMF had said failure to pay would not technically be classed as a default, only an arrears. The deadline for payment is 6pm Washington (22.00 GMT). It is widely expected Greece will not be able to make the repayment.

    In addition, June 30 is also the day the previous Troika bailout programme will expire. So far no replacement has been found, with a consequence that the country will have no financial assistance from now on.

    In an attempt at an 11th hour deal to find a replacement for the programme Greek politicians proposed a new two year bailout deal on Tuesday, however, this was rejected by Angela Merkel, who said there would be no deal now until after the referendum.

    Over the weekend Tspiras announced a referendum to be held on Sunday to let the Greek people decide whether or not to accept the creditor’s final offer.

    On the data front, the release of Euro-zone CPI for June was awaited with much anticipation after German CPI yesterday undershot expectations leading some to expect the data for the euro-zone to show the same temporary fall back into deflationary territory. However, in the end the data came out in line with expectations, leading to no increase in weakness for the single currency.

    USD

    The dollar rose against a basket of currencies on Tuesday after Consumer Confidence increased in June to a higher-than-expected 101.4 from 95.4 previously when it had been forecast to only rise to 97.1.

    Other data included the Chicago Purchasing Manager Index, which failed to meet expectations of 50.0, after only managing to reach 49.4, instead from 46.2 previously.

    A well known gauge of the cost of family homes, the S&P/Case-Schiller Composite-20 Index, showed a slow-down to 4.91% in April, from 4.94% in the previous year, when it had been forecast to rise to 5.50%.

    The fed continues to be on track for a rate hike this year – possibly even in September according to New York Fed’s Dudley, who gave a speech on monetary policy on Friday, particularly in growth in Q’s 2 and 3 are over 2.5%.

    GBP

    The pound traded mixed on Tuesday – rising against the euro on Grexit concerns, but pulling-back against the dollar and the yen as trader’s booked profits on the recent rally.

    Sterling was broadly supported by strong data which showed the final estimate for growth in Q1 was actually a little higher than previous estimates, after it showed a rise to 2.9% yoy from 2.4% previously, and beating the 2.5% expected.

    Quarter-on-quarter, however, data only showed a slight basis point increase to 0.4% as analysts had estimated.

    Other data showed an increase in Business Investment, which gained 2.0% qoq and 5.7% yoy for the 1st quarter. Both these figures easily beat previous results.

    The Current Account failed to recover as much as had been expected, after it showed a deficit of -26.5bn against forecasts of -24.0bn.

    Index of Services and Lloyds Business Barometer, came out more or less in line with estimates, except the former on a monthly basis rose by a less-than-expected 0.2% in April versus the 0.3% investors had been waiting for.

    JPY

    The Japanese yen gathered momentum as safe haven trading pushed up the currency and even a dollar rally this morning could not halt its strengthening.

    Monday’s moves continue to highlight the degree to which investors have struggled to interpret how risks would play out in the currency markets.

    Earlier today data showed that Japan’s labour cash earnings unexpectedly advanced less than expected by 0.6% in May.

    In remarks via Reuters on Monday BOJ’s Governor Kuroda said that it had become a common understanding among central banks that unconventional monetary policy, despite lingering scepticism from the academic front, has proven to be effective. He also said that inflation was widely perceived to be ultimately a monetary phenomenon, so creation of a massive quantity of money would be a strong signal of a central bank’s commitment to fight deflation.

    He again reiterated that the BOJ’s commitment to achieving the 2.0% inflation target will never be compromised and that he was confident tha BOJ can achieve its inflation target with “unwavering determination.”


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