USD Ends Week In The Red; Grexit Fears Fail To Subside

USD ends the week in the red following the FOMC lowering their median FFR forecast both 2016 and 2017, while fears of a Grexit fail to subside

While this week’s news flow has mainly focused around the situation in Europe, with Greece appearing to still be far away from coming to an agreement with their creditors, the most notable FX moves have once again been in the USD. The greenback ends the week in the red after the FOMC decision on Wednesday struck a dovish tone, which also saw the best weekly gains in T-Notes since April. This comes as market participants focused on accompanying projections as the FOMC left its median FFR forecast for this year unchanged, but cut its estimates for both 2016 and 2017, despite comments highlighting that slack in the job market had diminished and the US economy was growing. The conflicting message from the FOMC meeting was exemplified through Goldman Sachs (NYSE:GS) and Deutsche Bank (XETRA:DBKGn), with the former pushing back the date of their first projected Fed rate hike from September to December, while the latter brought forward the date of their first projected rate hike from December to September.

Elsewhere, GBP has strengthened throughout the week to reach its highest level since November 2014, after a spate of positive data including employment data and retail sales combined with hawkish comments from BoE’s Forbes, stating she foresees an increase in interest rates in the 'not too distant future,' and that the bank could lift rates before UK CPI gets to its 2% target.

Finally this week, EUR has proved relatively resilient to the onslaught of comments from both Greece and its creditors throughout the week; however, with yet another last ditch meeting to strike a deal scheduled for Monday, as well as continued speculation of the possibility of capital controls, the situation may well come to a head during the next trading week, with a reaction in EUR something to look out for.

Away from the Greek saga, next week also sees a host of tier one data, including Manufacturing PMI’s from numerous countries, US Durable goods and German IFO Business Climate, as well as plenty of Central Bank speakers.