GBP/EUR 1.4121 (0.7079)
Yesterday was a day for the dollar, it began with a post-holiday surge in demand for the greenback before better than expected US data backed up the USD. The EUR struggled as Greek headlines crossed the wires and as expected GBP was led by the performance of its counter currency, it was stronger against a weakening Euro and weaker against the USD. Overall global risk appetite remained somewhat to the downside, Eurozone stocks struggled on Greek headlines while in the US the Dow, S&P and NASDAQ were all down over 1%. Overnight markets have remained much the same, USD outperformed vs the AUD and NZD, while the JPY was marginally stronger but still just trading below 123.00 vs the USD, close to 8 years highs for the USD vs the Yen. The EUR and GBP both clawed back some of yesterday’s lost ground but overall the USD maintains control.
It’s difficult to talk about yesterday without focusing on the USD, there was no major data of note from the European session (aside from Greek lip service), while in the US session there was a host of key data points, most of which were better than expected. First up durable goods orders rose 0.5% as expected through April, the key figure however was the better than expected rise in ex transportation figure which was also up 0.5% vs 0.3% expected. Housing data also saw stronger prints than expected, with the House Price Purchase Index, Case Schiller Index, and New Homes Sales all beating the analysts’ expectations. This has been one of the most consistent months for housing data and while there have been a couple of misses in what is a heavily analysed area, overall this month’s housing data has been firmer than expected. Consumer confidence backed up the day posting 95.4 vs 95.0 expected. The USD index rallied to fresh 1 month highs, as EURUSD dropped below 1.0900 and GBPUSD dipped sub 1.5400. Today is exceptionally light on the data front, with USD likely to be dictated by larger risk trends.
There is really nothing of note from today’s economic calendar with the exception of a Canadian interest rate decision which is not expected to change from 0.75%. While we mentioned the above strong data gave the USD cause for rally much of the dollar’s advance came as European markets came on line and with that a surge in Greek yields suggesting much of the USD move was a risk aversion play initially and investors sought protection from Eurozone instability caused by Greek headlines over the weekend. The opinion of both sides is Greece will not be able to make their June 5th payment to the IMF. This was once again echoed in comments yesterday and there is certainly an urgency about negotiations as the deadline approaches. Greece still have government and public sector salaries to pay before the end of the month and this may even be a stretch too far. G7 ministers and central bank heads will meet in Germany to begin a three day meeting, no doubt Greece will feature in discussions and we will keep an eye on headlines around this meeting and the impact on overall risk appetite.