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.

 

Report by Alistair Cotton

Written by
Currencies Direct

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