Raphael Sonabend, FX Analyst
After a week of negotiating, a four month bailout extension was agreed between Greece and Germany, the final details of which will be confirmed tomorrow. Euro pairings initially saw strength as a result but this was quickly reversed as traders noted that this was not a final resolution but a four-month postponement. As Germany boasted over this ‘win’ against Greece, the Greek PM and Finance Minister both felt that a compromise will be seen in the near-future. Hopes of euro strength will now be dependent on how quickly final terms are decided. With the ECB already saying that they are ready to reintroduce waiver for Greek collateral, perhaps a final conclusion is near. Little data out today will leave the FX markets trading on the back of Friday’s news, any further developments will aid market movement.
GBP/EUR: Currently trading at 1.3568
- As Greece and Germany came to a four-month extension deal on Friday evening, this pair fell two cent in favour of the euro. Terms of the deal will be approved tomorrow and whilst no one is fooled that this is the end of Greece’s troubles, all parties seem satisfied that a final compromise is near.
- Sterling quickly recovered lost ground against the euro over the weekend and this morning, with the rate pushing above 1.355. Poor German Ifo business climate figures this morning has helped increase Sterling gains. With no more data of note due for the rest of the day, the pound could continue to recover its losses.
GBP/USD: Currently trading at 1.5382
- Relatively range-bound trading was seen in this pairing on Friday as traders focused on news out of the Eurozone. The pound posted slight gains throughout the day, possibly as a result of UK retail sales rising 5.4% on the previous year.
- Little data out today will leave traders looking at ‘less-important’ figures in the form of CBI realised sales out of the UK and existing home sales data out of the US. UK data is predicted to rise from +39 to +42 and existing home sales are forecast to fall slightly from 5.04M to 5.03M. The pound may continue to gain ground for the rest of the day.
EUR/USD: Currently trading at 1.1330
- The Euro managed to strengthen on Friday evening on the back of the news that a 4-month bailout extension has been agreed for Greece, allowing the pairing to break above the 1.14 mark. These gains were short lived however and the pairing since corrected itself in the Asian markets.
- The German Ifo business climate fell below forecasts and hit 106.8, just 0.1 above the previous result. This poor result has seen the dollar gain some more ground against the euro. A quiet day in terms of announcements from both sides of the Atlantic means that we expect to see fairly range-bound activity, with perhaps some movement expected later this afternoon with the release of Existing Home Sale figures in the US.
GBP/AUD: Currently trading at 1.9744
- As predicted, after the unexpected Aussie gains met resistance, the remainder of Friday’s session offered little volatility and the rate stabilised and closed around 1.96. Sterling has started this week on the front foot as the pound has already found a cent against the Aussie this morning.
- A quiet calendar today will leave traders looking towards the UK inflation report hearing tomorrow morning, which could provide some positive comments following the recent rise in oil prices. Later this week Australian private capital expenditure data is forecast to significantly drop off and UK GDP figures are also scheduled for release on Thursday.
GBP/NZD: Currently trading at 2.0474
- The pound has climbed just under two cent against the NZD since Friday as UK retail sales posted a strong 5.4% gain on the year before. The Kiwi saw slight strength this morning as NZ credit card spending rose 6.2% on the previous year but this relatively low-impact data failed to hold real interest and the pound quickly recovered these losses.
- UK CBI realised sales is the only data out of either country today and with this forecast to improve, we could see further Sterling gains.
GBP/CAD: Currently trading at 1.9342
- Friday’s early morning surge by the Loonie was very much short lived as all support was lost when news that Canada’s retails sales came in way below expectation.
- The trend continues as we begin this week, with the pound building an early morning advance as markets open. We have a relatively quiet calendar ahead today, with the only real driver being the UK CBI Realised Sales data at 11am. If the outcome is in line with forecasts we expect the rate to continue moving in Sterling’s favour.
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