Forex General Overview
There is No sign of a deal in Greece but the European market was up earlier during the London session. During yesterday’s European emergency meeting, it was announce that they now have a foundation for further talks and that there will be progress made over the course of the week.
Business activity in the 19-member euro zone expanded at its fastest pace in four years in June, data on Tuesday showed, in the latest sign that a recovery in the region is finally gaining traction.
Generally the mood seems to be that an agreement is going to be reached, though the IMF are still taking the hardest line, with Christine Lagarde saying they are 'short on time, long on work to do and the new proposals still short on everything that should be expected'.
US Dollar (USD):
Dollar is rallying right now right before the New York session as the FOMC members speak about the Federal Reserve's looming decisions, including the first potential interest rate increase in a decade, in Washington DC. This had an effect on all major currencies across the board pushing EUR/USD lower and USD/JPY higher.
British Pound (GBP):
In the UK, Bank of England member Cunliffe made some hawkish comments yesterday when he spoke of the UK labour market approaching the end of spare capacity. He sees continued increases in pay as well as productivity, both of which are key barometers for the Bank to measure when to raise interest rates. His tone had little effect on Sterling though, which was dragged a little lower in overnight markets by a stronger Dollar theme.
The British Chamber of Commerce have said they'll back David Cameron for the UK to stay in Europe, providing the PM secures a better deal for the UK, including balanced immigration policies and an opt-out from an 'ever closer Europe'. The PM is due to travel to Brussels for talks on Thursday, where hopefully other European leaders will have Greece wrapped up and in a position to have a sensible conversation.
Ministers did manage a bit of multi-tasking yesterday though, as they decided to extend sanctions against Russia from the end of this year, to the end of January 2016. They want to see if Russia fully upholds its Minsk agreement promises, which were made in February of this year.
China came back from their long weekend overnight. The Shanghai index was one of the weaker performers of the Asian markets, but did manage to post modest gains following last week's massive slide. Data overnight shows the economic fundamentals might not be as bad as first thought. The Chinese Beige Book showed retail and property sectors have helped the second quarter recover from a disappointing first. Whether this is enough to stop the price corrections remains to be seen though.
Canadian Dollar (CAD):
Inflation has got higher. Crude oil prices have been gradually climbing since the start of the year, allowing the positively correlated Canadian dollar to regain ground as well. Manufacturing activity in Canada is also hinting at a potential rebound. However Consumer Spending, employment gains and wage growth has yet to show reflection of what appears to be a stronger economy.
All in all, these data points paint a relatively hopeful picture for the Canadian economy, as inflation, manufacturing. and employment figures suggest a potential rebound for trade activity and consumer spending. Compared to its other commodity-driven peers Australia and New Zealand, Canada ain’t doing so bad!
Today we saw European PMI numbers, which should looked good, given the renewed confidence in the region and the ECB's QE purchases filtering down into the economy. We also see a host of US manufacturing data in the afternoon, so today will be less about Greece and more about the facts.