U.S. economy grew 4.3% in the third quarter, crushing estimates
The US dollar was mostly flat in Asian trading as yesterday’s final first quarter GDP estimate came in within forecasts at -0.2%. The upward revision from -0.7% was mainly due to higher household consumption and rising incomes. But the greenback lost momentum as there were no surprises in the figures and the lack of any other significant data releases shifted the focus back to Greece.
The Eurogroup meeting of Eurozone finance ministers ended without an agreement but talks are set to continue today. The IMF has objected to Greece’s tax rise proposals arguing that tax increases are more damaging to economic growth than cuts in spending. The IMF wants Greece to instead to reduce its large pension contributions.
European equities ended Wednesday lower on the latest impasse in the talks and Asian shares were also down today. Crude oil prices fell by around 1% after a drop in US crude stockpiles for the 8th straight week were shrugged off by the markets as this was offset by an increase in refined products and on expectations that supply will remain high.
The euro turned volatile in late Asian session ahead of today’s talks on Greece. The single currency fell to 1.1191 against the greenback and was down at 0.7131 against sterling. The dollar pulled back from the 124 level against the yen and was trading at 123.74. The pound was trying to regain the 1.57 handle against the dollar after yesterday’s sharp falls from 1.58, but was struggling at 1.5696. Meanwhile the kiwi bounced back from its recent 5-year lows to rise to 0.6896 against the greenback.
The timing of the Fed’s rate hike will likely be back on investors’ minds later today as US personal income and personal spending data is released for May, which should give an indication on the strength of household spending in the second quarter. The Markit flash services PMI is also out, which is expected to have improved slightly in June. A speech by Fed Governor Jerome Powell will also be interesting to watch following his hawkish comments on Tuesday on US rates outlook. Finally for the US, the weekly jobless claims for week ending June 20 are published.
The Greek debt talks are expected to once again occupy the headlines during the course of the day but the main attention will be on the EU Economic summit, which starts at 14:00 GMT, where Greece will be the dominant items on the agenda along the UK’s demands for renegotiation of its EU relationship and the migrant crisis in the Mediterranean.