The euro drifted lower in early Asian trade as the markets await the outcome of the Eurogroup meeting of Eurozone finance ministers and the EU summit to be held later today. It is thought Tuesday’s meetings will be the last realistic chance for Greece to present a credible reform plan needed to secure new funding for its cash-strapped economy.
It is hoped Greece’s newly appointed finance minister Euclid Tsakalotos will be able to soothe relations with Eurozone finance ministers following Monday’s surprise resignation of his predecessor Yanis Varoufakis whose confrontational style was much disliked by his European partners.
Pressure on Athens to come up with a viable plan is mounting after the European Central Bank yesterday raised the collateral required to qualify for emergency lending. This tightens the squeeze on Greek banks, who are already struggling to keep afloat since the ECB capped the ELA at €89 billion. The ECB will next meet on Wednesday to review its policy while Greek banks are expected to remain closed at least until Wednesday.
Asian stocks were mixed as Tokyo bounced back from yesterday’s losses but China’s main indices were down by over 1% after failing to sustain Monday’s gains on the back of the liquidity boost provided by the authorities via margin financing.
The aussie strengthened against the US dollar immediately after the Reserve Bank of Australia kept its overnight cash rate unchanged at 2%. But it soon reversed and was headed lower at 0.7479 against the greenback. In its statement, the RBA said that “further depreciation seems both likely and necessary” regarding the Australian dollar, which has declined significantly since the middle of June due to further falls in iron ore prices.
The euro was little moved from weaker-than-expected German industrial production data, which showed output staying unchanged in May, versus forecasts that it would rise by 0.1% on the month. The single currency slipped to 1.1027 against the dollar but was firmer against sterling at 0.7081. The pound fell sharply against the greenback in Asian session from just above 1.56 to 1.5567.
The dollar, which initially fell on the release of disappointing Services PMI and ISM non-manufacturing figures on Monday, has been gaining ground in late US and early Asian sessions. It was trading at 122.70 against the yen in late Asian trading and has risen to 1.2671 against the Canadian dollar.
Crude oil prices continue to fall as the Greek crisis and a potential deal with Iran weigh on prices. Brent crude oil tumbled by 6% on Monday to $56.78 per barrel.
Aside from the Eurogroup meeting and EU summit coming up later in the day, the main data to watch out for will be UK industrial and manufacturing production figures. Also of interest will be US trade balance and JOLTS job openings numbers.
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