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    European Session – Euro tumbles on Greek risk, dollar lifted by strong US data

    Greek risk remains elevated after a missed IMF payment and expiry of the current bailout programme.

    Hopes for an agreement rose after reports that Greek Prime Minister Alexis Tsipras wrote a letter to Greece’s creditors indicating that he would accept all bailout terms that were offered last weekend with only a few minor changes. German Finance Minister Wolfgang Schaeuble said the letter was not a basis for serious negotations. This put pressure on the euro. German Chancellor Angela Merkel reiterated her stance of no new negotiations with the Greek government until after the referendum.

    Meanwhile, the Eurogroup is willing to avoid a Grexit and will examine the Greek government’s latest proposal. Eurozone finance ministers will be holding a teleconference at 15:30 GMT.

    Data were ignored today and had little impact on the euro as June Eurozone manufacturing PMI came in line with the flash 52.5 reading.

    The euro had a good run in the early part of the European Session, rising to a high of 1.1170 before falling to 1.1059 on Greece risk and a stronger dollar.

    Sterling fell sharply after UK manufacturing PMI missed forecasts to drop to 51.4 from 51.9. This is a two-year low and is not good news for those expecting a rate hike this year. Cable tumbled on the news to 1.5645 from 1.5733. It continued lower to 1.5619.

    Adding to the pound’s weakness were comments from Bank of England Governor Mark Carney during a Bank of England Financial Stability Report press conference. Carney was quite pessimistic about risks to the UK banking system due to the Greek debt crisis.

    The dollar rose above the 123 yen handle after being boosted by US data. The ADP employment report was the strongest since December as 237,000 private sector jobs were created in June. This was more than the estimated 218,000, while the prior number in May was revised up from 201,000 to 203,000 jobs.

    The dollar was given another lift after more upbeat US data to rise to 123.23 yen. The ISM manufacturing PMI index showed a rebound to 53.5 from 52.8, and above a 53.2 forecast. The data indicates the US economy is gaining momentum and this raises the odds of a September rate hike from the Federal Reserve. Focus now turns to Thursday’s all-important US non-farm payrolls report.

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