Sterling was one of the best performing major currencies today as it reacted positively to the minutes from the Bank of England’s latest policy meeting. Although Monetary Policy Committee members were unanimous in their decision to keep interest rates unchanged at 0.50%, the minutes indicated that more members were leaning towards a rate hike.
The pound began rising against the dollar early in the European session to a high of 1.5623 and then briefly spiked higher after the release of the minutes to 1.5647. Prices steadied for the rest of the session but remained above the key 1.5600 level. Focus now turns to Thursday’s UK retail sales for June which are expected to improve from May’s levels.
The euro had an early burst higher against the dollar once Europe opened, to reach 1.0966 but the upside momentum faded as investors became cautious ahead of tonight’s vote in the Greek parliament. A second set of reforms are expected to pass as a condition for talks to begin on a third bailout worth 86 billion euros. Greek Prime Minister Alexis Tsipras hopes the negotiations can be wrapped up by August 20. (The Greek government has an important loan payment due to the ECB on this day). Tsipras also said today that he wants to call elections soon after the bailout is signed. Meanwhile, the ECB increased emergency liquidity (ELA) to Greek banks today by 900 million euros.
The euro was not able to hold the 1.09 handle and fell to as low as 1.0881 by the time the US session came around. A firmer dollar after upbeat US existing home sales accelerated the euro’s decline. Against the pound, the single currency was down to 0.6963 after rising above the key 0.7000 level yesterday.
The dollar strengthened after data showed resales for US homes jumped in June to their highest level in nearly 8-1/2 years. Sales rose 3.2% from May’s 5.32 million units (which was revised lower) to an annualized pace of 5.49 million in June. Expectations were only for a 0.9% increase.
The US dollar reversed losses against the yen following the existing home sales data and rose to a high of 124.07, moving off an earlier low of 123.56. Existing homes make up a large part of the US housing market, so today’s figures are good for the housing sector and the overall economy.
Next up on the economic calendar is the Reserve Bank of New Zealand rate announcement. The central bank is expected to cut its main cash rate by 25 basis points to 3%. The kiwi is currently trading around 0.6562 versus the US dollar. A six-year low of 0.6496 was reached on July 16.
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