Daily currency report

The main focus for the start of the week once again lands in Greece where a Parliamentary vote over austerity measures is required to pass in order for the country to obtain the next tranche of bailout funds. Protests are expected to start tomorrow ahead of the vote, but debate over the measures gets underway. In the UK, sterling is likely to continue facing selling pressure from last week’s dovish MPC minutes. In the US, debate over the debt ceiling continues, but investors have put a move against the dollar aside for the moment as they focus on the more immediate problem of Greece.

Sterling

UK Financial Policy Committee admitted that the biggest threat to the UK’s financial position is the European debt crisis. Sterling could face selling pressure after such comments.

US Dollar

The final Q1 GDP figure was released alongside durable goods data. The outcome was a small increase to 1.9 per cent for the year, which was expected. Durable goods were up, beating the forecasts. The data supported a dollar positive move that was already underway. Investors were seen buying the US dollar as a safe haven. US Treasury Secretary Timothy Geithner tried to calm markets over the US debt ceiling debate, saying that lawmakers would “absolutely” be able to reach a deal. While the debt ceiling remains an ongoing issue in the US and could potentially be a big negative for the dollar, its downside impact is being put on hold until the more immediate crisis facing Greece has been dealt with.

Euro

German IFO mbusiness sentiment figures were released above market forecasts and helped to support the euro, but the economic data was not strong enough to sway investors away from focusing on the Greek debt crisis, which will be this week’s main theme as well. The Greek Parliament will begin debating the austerity measures and should have a vote by mid-week.

Japanese yen

Moody’s, a ratings agency, announced that the breach of the government’s self-imposed deadline of June 20 to announce its long-term fiscal reform programme is a credit negative event. The announcement comes at the same time as PM Kan faces increased pressure to step aside. The yen is likely to strengthen not only for local safe haven reasons, but also as markets await the Greek vote.

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