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    Euro falls despite provisional agreement on fears of political backlash

    EUR

    The euro fell against most counterparts on Monday despite Greece ending the deadlock with its major creditors and agreeing a provisional bailout deal worth up to 86bn, to provide financial assistance to the country’s cash-strapped institutions and banking system, after a weekend of intense negotiations.

    Enthusiasm for the euro remained tepid, however, as the success of the deal was subject to a vote through the Greek parliament – and German parliament – scheduled for Wednesday and Friday. Greek Prime Minister Alexis Tsipras, was forced to make major concessions to forge the bailout accord, and this has already generated many enemies, who will vote against it, especially within the government’s own fracturing Syriza party.

    In a 22-hour meeting, Tsipras was forced to concede major reforms to VAT, pensions, benefits and bankruptcy laws. In addition, Greek assets worth 50bn would be placed in a ‘fund’ to be privatized and used to cut the debt. The deal would also mean that wealthy depositors on Greece’s teetering banking system could lose a large proportion of their deposits. It also – perhaps most controversially – included continued supervisions by the hated Troika bailout monitors.

    The list of reforms was seen by some commentators as a humiliating retreat for Greece, and in some ways includes worse concessions than those rejected in the referendum list two weeks ago. It is thought fears of a financial meltdown in Greece forced a volte-face in it’s previously stubborn leader. Chancellor Angela Merkel, however, praised the agreement as a “victory”.

    USD

    The dollar rose on Monday after negotiators finally reached an agreement to bailout Greece, removing another major obstacle keeping the Fed from raising rates, after the June meeting minutes and commentary from Janet Yellen had underlined the growing importance of ‘external factors’ in determining the right climate for a hike.

    The only other data out for the dollar was the monthly Budget Statement, which showed a surplus of 51.8bn in June, which was slightly above the 50.0bn forecast but 70.0bn previously.

    GBP

    The pound traded mixed on Monday after U.K data was eclipsed by more important news impacting on counterparts.

    Versus the dollar it fell as the greenback strengthened following the agreement of a bailout between Greece and the Troika removed an obstacle to the Fed pressing the button for a rate hike ‘lift-off’.

    The euro fell, however, as investors remained sceptical about whether the deal would be politically acceptable in Greece.

    The main news story from the U.K was data on lending from the BOE, which published its Credit Conditions survey. The report showed broadly increased levels of borrowing, particularly mortgage borrowing and small business loans. Borrowing of unsecured loans such a credit cards remained unchanged but at “relatively” high levels.

    The report also showed an “encouraging fall” in default loans across all sectors, which was evidence taken with the rest of the data that the U.K economy had undergone a strong recovery.

    JPY

    The yen extended its gains in early safe haven trading in the Asian session after no deal had been reached with Greece. However by 8am London time agreement had been reached and by midday the currency was trading at 123.37 per dollar.

    Earlier today data showed that the final estimate for Industrial Production in Japan retracted 2.1% mom in May, following a decrease of 2.2% in April. Meanwhile the Tertiary Industry Index eased more than expected by 0.7% on a monthly basis in May, compared to a revised drop of 0.1% in April.

    Meanwhile the BOJ’s monetary policy statement scheduled for release on Wednesday will keep investors on their toes although the latest Bloomberg survey have 33 of 35 economists saying policy will remain on hold.

    Also to watch for are the BOJ growth forecasts. The Nikkei has reported that the bank may lower its GDP outlook from 2% in April.

    EUR

    The euro fell against most counterparts on Monday despite Greece ending the deadlock with its major creditors and agreeing a provisional bailout deal worth up to 86bn, to provide financial assistance to the country’s cash-strapped institutions and banking system, after a weekend of intense negotiations.

    Enthusiasm for the euro remained tepid, however, as the success of the deal was subject to a vote through the Greek parliament – and German parliament – scheduled for Wednesday and Friday. Greek Prime Minister Alexis Tsipras, was forced to make major concessions to forge the bailout accord, and this has already generated many enemies, who will vote against it, especially within the government’s own fracturing Syriza party.

    In a 22-hour meeting, Tsipras was forced to concede major reforms to VAT, pensions, benefits and bankruptcy laws. In addition, Greek assets worth 50bn would be placed in a ‘fund’ to be privatized and used to cut the debt. The deal would also mean that wealthy depositors on Greece’s teetering banking system could lose a large proportion of their deposits. It also – perhaps most controversially – included continued supervisions by the hated Troika bailout monitors.

    The list of reforms was seen by some commentators as a humiliating retreat for Greece, and in some ways includes worse concessions than those rejected in the referendum list two weeks ago. It is thought fears of a financial meltdown in Greece forced a volte-face in it’s previously stubborn leader. Chancellor Angela Merkel, however, praised the agreement as a “victory”.

    USD

    The dollar rose on Monday after negotiators finally reached an agreement to bailout Greece, removing another major obstacle keeping the Fed from raising rates, after the June meeting minutes and commentary from Janet Yellen had underlined the growing importance of ‘external factors’ in determining the right climate for a hike.

    The only other data out for the dollar was the monthly Budget Statement, which showed a surplus of 51.8bn in June, which was slightly above the 50.0bn forecast but 70.0bn previously.

    GBP

    The pound traded mixed on Monday after U.K data was eclipsed by more important news impacting on counterparts.

    Versus the dollar it fell as the greenback strengthened following the agreement of a bailout between Greece and the Troika removed an obstacle to the Fed pressing the button for a rate hike ‘lift-off’.

    The euro fell, however, as investors remained sceptical about whether the deal would be politically acceptable in Greece.

    The main news story from the U.K was data on lending from the BOE, which published its Credit Conditions survey. The report showed broadly increased levels of borrowing, particularly mortgage borrowing and small business loans. Borrowing of unsecured loans such a credit cards remained unchanged but at “relatively” high levels.

    The report also showed an “encouraging fall” in default loans across all sectors, which was evidence taken with the rest of the data that the U.K economy had undergone a strong recovery.

    JPY

    The yen extended its gains in early safe haven trading in the Asian session after no deal had been reached with Greece. However by 8am London time agreement had been reached and by midday the currency was trading at 123.37 per dollar.

    Earlier today data showed that the final estimate for Industrial Production in Japan retracted 2.1% mom in May, following a decrease of 2.2% in April. Meanwhile the Tertiary Industry Index eased more than expected by 0.7% on a monthly basis in May, compared to a revised drop of 0.1% in April.

    Meanwhile the BOJ’s monetary policy statement scheduled for release on Wednesday will keep investors on their toes although the latest Bloomberg survey have 33 of 35 economists saying policy will remain on hold.

    Also to watch for are the BOJ growth forecasts. The Nikkei has reported that the bank may lower its GDP outlook from 2% in April.


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