European and global leaders met over the weekend to try to calm markets, which grew increasingly anxious at the end of last week over the possibility of a Greek default. The Greek government faces a vote of no-confidence. The vote must be passed in order for the government to vote on austerity measures required for the country to receive its fifth tranche of IMF funds. In the meantime, it would appear that an impasse between the ECB, France and Germany has been broken. Germany appears willing to allow private investors the opportunity to promise to buy more Greek debt instead of forcing a “credit event”. The details are uncertain and more information is not expected until the beginning of July.

Sterling

Last week’s economic data did no favours for sterling. The drop in retail sales figures, a small increase in the claimant count and an elevated inflation rate did not support sterling. This week starts with the releases of CBI industrial trends. The manufacturing sector, like in the US, has seen patches of weakness recently. The trend should continue to be felt in the data.

US dollar

The focus this week will shift slightly towards the US where the FOMC will meet to discuss monetary policy. The two-day policy meeting is expected to result in no change in policy. Markets will be waiting for comments from Ben Bernanke as to whether he feels that the recent economic downturn is just a ‘soft patch’ or whether it could be the beginning of a more protracted downturn. The Federal Reserve is facing an economy that has slowed, but rising core inflationary pressures.

Euro

The euro could find some support by efforts made by global leaders over the weekend to resolve the European debt crisis. Not only did global leaders hold discussions over what action to take, but also an agreement was made amongst European nations over a second bailout. Eurogroup Finance Ministers will meet to work through the details of a second bailout package agreed to over the weekend. Little is known, but it appears that the new bailout will cost approximately €120 billion.

Japanese yen

Trade figures prompted fresh buying of the yen, which is seen as a safe haven currency in times of nervousness. Trade figures released in Japan showed exports falling in May. The bigger than expected decline in the trade figures suggested that the recovery may not be as strong as originally thought.

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