The US dollar made little headway as markets waited on word about Greece and whether it would receive default-averting money in time. Greece has a massive €1.6bn bill to pay to the IMF by Tuesday. Without access to its remaining bailout funds, Athens could default, a scenario that could hasten its exit from the euro and lead to financial market pandemonium. The dollar, meanwhile, held a solid lead against its rivals for the week, amid elevated expectations for the Federal Reserve to boost interest rates. The franc plunged nearly one per cent to multi-week lows after the chairman of the Swiss National Bank offered a stern warning that its currency was overvalued.
Euro
The euro idled near multi-week lows as markets awaited word on Greece. If and when a Greek deal for more default and euro exit-averting money is sealed, the market focus is expected to shift back to fundamentals, a key source of weakness for the euro. Although prospects for Europe’s economy have brightened, with inflation above recent lows and unemployment below recent highs, officials are not expected to taper back on their super low rate policies for a very long time, which contrasts America’s outlook for higher, dollar-positive interest rate policy.
Sterling
Gains against the euro helped underpin the pound against the dollar. Sterling sentiment received quite a makeover from news last week of the fastest growth in UK pay cheques in four years, encouraging news that suggested the wait for a UK rate hike has grown shorter. Doubts remain about the sustainability of the pound’s rise, however, with it at risk of slipping should the US economy show more convincing signs of improvement.
US dollar
A trio of constructive US data helped validate the dollar’s buoyant week and leave in line for further appreciation. Signalling a green light for a US rate hike, consumer spending soared 0.9 per cent in May, the most in six years, weekly jobless claims came in below forecasts, keeping beneath a historically healthy level, for a 16th straight week, while incomes rose a solid 0.5 per cent. Inflation was largely steady with annual core prices up 1.2 per cent.