Sterling powers on, Dollar stabilises
Sterling continued to be the G10’s golden child yesterday as retail sales came in slightly better than expected, which along with the more positive Bank of England minutes, saw GBPUSD move up above 1.59 at the highest levels since November last year. We have fallen back a bit since the better-than-expected Philadelphia Fed manufacturing survey and US initial claims, which seem to have stopped the US dollar rout for now. The US data has continued to be mixed, but all expectations are still for a hike in September or December, so the US dollar was starting to look a little oversold.
All eyes on Greece
There is very little data out today, so the void in new information will no doubt be filled with continued speculation around who is going to do what in Greece. More than ever, there seem to be many voices with lots of different messages. The French finance minister saying an exit would be catastrophic for Greece, while Merkel says a deal can still be reached. But with slightly less well-aligned comments from Germany’s Gabriel that Greek aid would continue after exit in any case!
The German newspaper, Die Zeit, suggested the EU and the Eurogroup are about to table a proposal to extend the bailout program to December, but this was immediately denied by EU officials.
Greece has submitted a new proposal which they hope the Eurogroup can agree with comments that the blind insistence on pensions changes would worsen the crisis. While the officials in Luxembourg commented that Greek banks may be out of liquidity and not open on Monday when there will apparently be a Eurozone leaders’ summit.
Not sure if we’re any closer, but we’ll see by Monday after this latest burst of activity. My best guess is that we get at least a temporary deal.
Further Swiss thoughts of intervention?
In holding rates at -0.75%, the Swiss National Bank commented about the peg they took away in January saying it was a question of when and not if. The current strength of CHF is hurting the Swiss economy and the SNB made a thinly veiled threat against speculatively buying Swiss francs. We did initially see Swiss lower, but it’s back at pre-comment levels so I guess they will have to do more than general jawboning.
