Whilst the news of a New Democracy win at the Greek polls caused a short lived rally in the single currency, the most euro-positive outcome of the weekend elections failed to quell market anxieties regarding other troubled European nations on Monday, UKForex reports.
Euro:
Peripheral government bond markets once again caught the market's attention with Spanish 10-year yields trading to a new euro-era high of 7.16%, leaving investors to ponder how these securities would have reacted in the event of a Greek anti-austerity party win on Sunday. It wasnt just fears over the state of Spanish sovereign finances that caused euro weakness on the day as a report released by the Iberian nations central bank revealed that bad debts held by Spanish banks rose to an 18-year high in April. Real money accounts were notable sellers of the EUR on the day which drove EUR/USD down towards 1.2550 during late afternoon trading. GBP/EUR performed well on the back of the prevailing euro weakness and ended the day on its highs at 1.2461 from London starting levels around 1.2340. Its fair to say that sterling saw some safe haven interest on the day but traders noted that with the prospect of further QE looming large over the UK currency, gains were always going to be moderate. It is likely to be another interesting day for the single currency as the market awaits definitive news that a coalition government has been formed in Greece and we will also see Spain attempt to auction off EUR 2-3 billion of 12 and 18 month T-bills. On the economic data front the German ZEW survey for June will certainly attract some attention from investors. GBP/EUR opens this morning at 1.2426.
United States Dollar:
GBP/USD traded in a narrow 1.5650/1.5700 range yesterday with the pair initially trickling lower as the Greek-election inspired risk rally waned and markets woke up to the fact that little had materially changed for the outlook of Greece. Sterling was pretty resilient however, with cable still buoyed above 1.5600 following its strong performance on Friday last week. The real test for the pound comes in the form of UK inflation data that will be released later this morning and if the recent trend of declining price pressures increases the expectation that the Bank of England will implement further QE then the UK currency will likely suffer. The USD continued to benefit from safe haven flows on Monday and with uncertainty still hanging over the ability of Greek politicians to swiftly form a coalition government it is likely that the greenback will continue to find strong bids but with chatter growing surrounding the possibility of the Fed implementing a fresh round of QE as early as Wednesday it is easy to envisage the moderation of USD strength going into the FOMC meeting. Tier 1 data from the worlds largest economy is fairly light on the ground today, although we do have some US housing market data which is always going to attract some market attention. Technically the 200-day moving average around 1.5750 (which the pound failed to breach yesterday) is likely to act as an upper bound for cable today and 1.5600 will act as strong support on the downside. GBP/USD opens this morning at 1.5676.
Aussie and Kiwi Dollars:
Despite the realization of the most risk-positive Greek election result the rally in the AUD and NZD was short-lived as market focus switched to the worrying move higher in Spanish borrowing costs. AUD/USD fell back to a low of 1.0057 but a large interbank sell order in EUR/AUD pushed AUD/USD back over 1.0100 where it consolidated for the rest of the day. The strength of the AUD pushed the GBP/AUD cross lower on Monday with the pair spiking to a low of 1.5436 as EUR/AUD selling took hold around the London fix. GBP/NZD was far choppier but traded in a narrow 1.9730/1.9841 range on the day. The focus for traders overnight was the release of the RBA minutes which indicated that the central banks decision to cut rates at their last meeting was finely balanced which garnered some support for the AUD. Expect the higher yielding currencies to continue to take their cue from events in Europe. GBP/AUD and GBP/NZD open this morning at 1.5468 and 1.9777 respectively.
Data releases for the next 24 hours:
AUD: No data due
EUR: French Business Confidence
GBP: CPI
NZD: Current Account
USD: Housing Starts, Building Permits
Euro:
Peripheral government bond markets once again caught the market's attention with Spanish 10-year yields trading to a new euro-era high of 7.16%, leaving investors to ponder how these securities would have reacted in the event of a Greek anti-austerity party win on Sunday. It wasnt just fears over the state of Spanish sovereign finances that caused euro weakness on the day as a report released by the Iberian nations central bank revealed that bad debts held by Spanish banks rose to an 18-year high in April. Real money accounts were notable sellers of the EUR on the day which drove EUR/USD down towards 1.2550 during late afternoon trading. GBP/EUR performed well on the back of the prevailing euro weakness and ended the day on its highs at 1.2461 from London starting levels around 1.2340. Its fair to say that sterling saw some safe haven interest on the day but traders noted that with the prospect of further QE looming large over the UK currency, gains were always going to be moderate. It is likely to be another interesting day for the single currency as the market awaits definitive news that a coalition government has been formed in Greece and we will also see Spain attempt to auction off EUR 2-3 billion of 12 and 18 month T-bills. On the economic data front the German ZEW survey for June will certainly attract some attention from investors. GBP/EUR opens this morning at 1.2426.
United States Dollar:
GBP/USD traded in a narrow 1.5650/1.5700 range yesterday with the pair initially trickling lower as the Greek-election inspired risk rally waned and markets woke up to the fact that little had materially changed for the outlook of Greece. Sterling was pretty resilient however, with cable still buoyed above 1.5600 following its strong performance on Friday last week. The real test for the pound comes in the form of UK inflation data that will be released later this morning and if the recent trend of declining price pressures increases the expectation that the Bank of England will implement further QE then the UK currency will likely suffer. The USD continued to benefit from safe haven flows on Monday and with uncertainty still hanging over the ability of Greek politicians to swiftly form a coalition government it is likely that the greenback will continue to find strong bids but with chatter growing surrounding the possibility of the Fed implementing a fresh round of QE as early as Wednesday it is easy to envisage the moderation of USD strength going into the FOMC meeting. Tier 1 data from the worlds largest economy is fairly light on the ground today, although we do have some US housing market data which is always going to attract some market attention. Technically the 200-day moving average around 1.5750 (which the pound failed to breach yesterday) is likely to act as an upper bound for cable today and 1.5600 will act as strong support on the downside. GBP/USD opens this morning at 1.5676.
Aussie and Kiwi Dollars:
Despite the realization of the most risk-positive Greek election result the rally in the AUD and NZD was short-lived as market focus switched to the worrying move higher in Spanish borrowing costs. AUD/USD fell back to a low of 1.0057 but a large interbank sell order in EUR/AUD pushed AUD/USD back over 1.0100 where it consolidated for the rest of the day. The strength of the AUD pushed the GBP/AUD cross lower on Monday with the pair spiking to a low of 1.5436 as EUR/AUD selling took hold around the London fix. GBP/NZD was far choppier but traded in a narrow 1.9730/1.9841 range on the day. The focus for traders overnight was the release of the RBA minutes which indicated that the central banks decision to cut rates at their last meeting was finely balanced which garnered some support for the AUD. Expect the higher yielding currencies to continue to take their cue from events in Europe. GBP/AUD and GBP/NZD open this morning at 1.5468 and 1.9777 respectively.
Data releases for the next 24 hours:
AUD: No data due
EUR: French Business Confidence
GBP: CPI
NZD: Current Account
USD: Housing Starts, Building Permits