Daily Market Report - 17/06/2015

The EUR had a good start to the week, gaining against a host of its major counterparts. Greek Finance Minister Varoufakis said that there will be no chance of a ‘Grexit’, but is seeking an extended redemption period for Greek debt, according to reports. However conflicting reports once again from an unquoted Greek Parliamentary spokesmen stating that Greece will not back down from what they have said previous in negotiations. Without a cash-for-reforms debt deal with the EU and IMF, Greece is expected to default on a €1.5bn debt repayment to the IMF due by the end of the month.

ECB president Draghi also gave a speech yesterday at the European Parliaments Economic and Monetary Affairs Committee, where he mainly focused on the economic recovery in the Eurozone and the ongoing situation surrounding Greece. Draghi stated that the economic recovery within the Eurozone is expected to widen, and that ELA (Emergency Liquidity Assistance) is to be increased as long as Greek banks remain solvent with enough collateral. He did however state that Greek leaders have personally given them their word that payments will be made on the scheduled date and time, and that the IMF think Greece will require additional funding with the sentiment shared by other lenders.

The week began with an extremely quiet day for the pound, with analysts being entirely sentiment driven. This was realised in the markets with the pound losing half a cent against both of the EUR and USD during the morning session, with no data to support the pound. The only notable piece of information concerning the UK was a comment in the Financial Times, stating that the Scottish National Party has threatened to call for another vote to break up the UK unless the government agrees to devolve more powers to Edinburgh. The concern is that with the SNP’s large presence in Scotland, the opportunity for a split from the UK is more likely than previous should a referendum take place. 

The dollar had a relatively quiet start to the week also, heading into the big monetary policy and interest rate announcement on Wednesday. With the USD gaining ground against both the GBP and the EUR, this was reversed in the afternoon sessions due to announcements concerning Europe and weak economic data. The month-on-month industrial production figures came in at -0.2%, far from the 0.3% that analysts had expected, and the capacity utilisation (which is a percentage of the US production capacity which is used over the short-time period) came in at 78.1% missing the consensus and previous month of 78.3%. The US also sold $48bn worth of 3 and 6 month bonds, pushing the 3 month yield to 0.01% from a previous of 0.015% and the 6 month yields up to 0.1% from a previous of 0.08%. The only other notable comment was Barclays increasing their growth outlook for the US in the second quarter, up 0.1% to 3.3%

Key Announcements

09:30 – GBP – Consumer Price Index (MoM) – expected to remain at 0.2%

10:00 – EUR – ZEW German economic sentiment

13:30 - USD - Building Permits