It was a quiet Monday as there were no major economic data releases today and Greece-related concerns have waned as the country aims to try to return to “normal” after an agreement for a bridge loan and to begin talks for a third bailout.
The good news today was that Greece is said to have proceeded with its payment to the ECB for a total of 4.2 billion euros in principal and interest and also a 2.05 billion euro payment to the IMF that has been in arrears since the country missed payments in June and July. Meanwhile, Greek banks reopened today after being closed for three weeks but capital controls remain with a weekly limit of 420 euros in place of the daily 60 euro limit previously.
Despite Greek concerns fading, the euro remains weak, trading below 1.09 today between a range of 1.0819 and 1.0863. One of the factors behind this weakness is the strength in the dollar as investors are focusing back on interest rate differentials between the Eurozone and the US. Recent hawkish comments from Fed Chair Janet Yellen have firmed rate hike expectations for later this year.
Sterling continued to fall today, giving back most of last week’s gains from Bank of England Governor Mark Carney’s comments that the time for a rate hike was closer. Cable fell for a fourth session against the dollar to touch as low as 1.5537. Focus will be on the BoE minutes out on Wednesday, while Thursday’s UK retail sales data are also important to watch.
The dollar was range-bound against the yen for most of the European session, reaching highs of 124.36.The diverging monetary policies between the Fed and the Bank of Japan are helping support the greenback. Meanwhile, last Friday’s upbeat US data on inflation and housing starts also helped lift the dollar. US consumer prices rose for a fifth straight month in June, while housing starts jumped and building permits surged to an eight-year high. The Bank of Japan will release policy meeting minutes tomorrow, although no surprises are expected.
Against a basket of major currencies, the dollar rose to a three-month high today. The firmer dollar helped keep gold under pressure, as the two assets tend to have an inverse price relationship. The precious metal fell to near six year lows at 1071.19.
Falling gold prices and overall weak commodity prices pushed the Australian dollar to a new six-year low of 0.7328 versus its US counterpart. Focus will remain on the aussie for tomorrow’s RBA minutes when investors will look to any shift in tone regarding the exchange rate and also on any hints of a rate cut.
In the meantime, the rest of the US session today will likely be quiet as there are no major US data releases scheduled.
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