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    European Session – Euro fades gains on Draghi comments, dollar down after US jobless claims

    The euro was pressured by comments from ECB President Mario Draghi as well as other ECB policymakers, including Weidmann and Hansson, who all highlighted the challenging situation for a Greek deal to be reached by Sunday.

    The euro fell back below the 1.11 level as investors became cautious ahead of key risk events. By tonight (midnight on Thursday) Greece has to submit a full proposal of reforms after applying for a new three-year bailout from its Eurozone creditors through the ESM (European Stability Mechanism). These proposals have to be reviewed first by Greek lawmakers, which include Pasok, Potami, and New Democracy before being sent to the institutions. Then the Eurogroup will hold a meeting on Saturday ahead of an EU Summit of all 28 EU-member countries on Sunday. Meanwhile, the ECB noted it was prepared to implement non-standard measures in case of Grexit.

    Aside from the Greece-related headlines today, Eurozone economic data was limited to stronger trade data from Germany, which led to a modest rally in the euro before fading in response to headline risk. From an early European session high of 1.1124, the euro fell down to as low as 1.1022.

    Sterling had a consolidative tone after pausing earlier gains. The pound moved in sympathy with euro weakness given the renewed focus on Greece arising from ECB policymakers’ comments. There were no UK data today except for the announcement that the Bank of England kept interest rates at a record low 0.50% once again and made no statement. Cable was mostly confined to a range of 1.5365 and 1.5419 in London trading.

    The dollar rallied against the yen in Asia after the Chinese stock market recovery but risk appetite faded by the time Europe came around and investors became more cautious because of risk from Greece. Meanwhile a disappointing US initial jobless claims number also weighed on the greenback. The number of Americans filing for unemployment benefits jumped 15,000 in the week ending July 4 to a seasonally adjusted 297,000, the highest since February. Today’s number was above a forecast of 275,000 claims and more than the prior week’s 281,000. The softer data comes a day after the Fed minutes which indicated that most FOMC members needed more evidence that economic growth was sufficiently strong and labor market conditions had firmed enough before they would consider a rate hike.

    The dollar fell versus the yen to a low of 121.30 yen after the jobless claims report down from a day’s high of 121.57 yen.

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