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    Asian Session – Euro rises on renewed hopes of Greek deal; Dollar eyes Yellen speech

    The euro rose in Asian trading after Greece met the deadline for submitting its latest proposal to its creditors to secure a new three-year bailout. The new loan is said to amount to €53.5 billion and includes reforms that were rejected in the bailout referendum such as increases in VAT and pensions cuts, as well defence cuts. However, it is thought that in exchange, Eurozone leaders will agree to some form of debt relief or restructuring for Greece. France, which has been pressing hard for a positive resolution in the crisis, provided technical assistance to the Greek government to prepare the latest proposal.

    The new plan has been approved by the Greek cabinet but now needs to be voted on by the parliament. The Eurogroup finance ministers are then set to meet on Saturday to decide whether the proposal meets the creditors’ requirements and EU leaders will hold a summit on Sunday to finalize the deal. Hopes of a positive outcome have been raised after Germany’s finance minister Wolfgang Schäuble, changed his tone on the possibility of a debt relief.

    The euro climbed to as high as 1.1133 dollars in late Asian session before easing to 1.1091. It was also stronger against both the pound at 0.7198 and the yen at 135.11.

    Chinese shares continued to recover on Friday with the main indices up by around 5%. This took the pressure off the yen which fell back from its recent gains against major currencies on concerns that the situation in China could develop to a full blown crisis. The dollar recovered partially to 121.86 yen, while both the aussie and the kiwi were firmer. The aussie was higher at 0.7467 against the greenback and the kiwi was up at 0.6756.

    The pound was little moved from yesterday’s Bank of England policy decision to keep rates unchanged. Worries over the unfolding situation with Greece had in recent days cast a cloud on the pound despite improving UK economic fundamentals. It is also uncertain how the budget will affect the Bank of England’s inflation outlook as there are worries that the new national living wage could put additional pressure on wages. Cable moved higher in Asian trading, jumping to 1.5430 at the start of European trading.

    The rest of the day is looking relatively quiet in terms of data with only French industrial production and UK trade figures to keep investors busy. The key event for Friday is likely to be the Fed Chair Janet Yellen’s speech on US economic outlook at 16:30 GMT as markets would be looking for further guidance on US rates outlook.

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