Markets wait for Greek vote

Currencies Direct June 28th 2011 - 2 minute read

Currency markets traded quietly overnight and have continued the theme have into this morning as nervy traders and investors wait for the result of the Greek vote of the recently announced austerity measures. The new rounds of cuts were required by the IMF and EU to release another tranche of bailout funds, without which Greece will run out of money by mid-July. Pictures of protesting Hellenic republic workers dominate the news channels at the moment and the markets remain very nervous. President Sarkozy is reported to have reached a deal with French banks over the rolling of Greek debt that the banks hold. Reaching an agreement with the banks was seen as a key hurdle to overcome in keeping the Greek situation from falling off the edge of a cliff and the Euro is trading higher this morning on the news.

The final reading of UK Q1 GDP was released at 9.30, and Sterling continues its recent theme and is down once again. The data showed that the Q1 reading was unchanged at 0.5%, but the year-on-year figure was 0.2% below estimates of 1.8%, and the Pound lost 40 pips against the Dollar and 25 against the Euro in quick order. Over the weekend the Bank of International settlements (BIS) released a report about when Central Banks around the world should begin to raise rates towards ‘normalised’ levels of around 5%. The BIS singled out of the Bank of England, citing almost 2 years of above target inflation and the threat of increased price pressures to come as reason to start to raise rates. Central Bank’ generally rely heavily on credibility to manage monetary policy and thus will naturally come out all guns blazing to defend their actions. Enter stage left the BoE’s arch dove Adam Posen, who this morning made comparisons of today with the 1930’s and how premature tightening then led first to social unrest and indirectly to the outbreak of war. Scary stuff indeed.

As the markets tread water in the run=up to this evenings vote in Greece, the US Dollar will hold ground against the Euro and Sterling. Later today US consumer confidence is due and another slight improvement is forecast after yesterday’s slight improvement in personal consumption.

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