Sterling Declines on Mixed data, Euro Edges Lower ahead of Eurogroup Meeting and US Dollar Rallies on safe-Haven Demand

Published: 7 Jul at 1 PM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, USA, Greece,

Pound Sterling (GBP)
The British Pound softened versus most of its major competitors on Tuesday afternoon following mixed results from economic data publications. Industrial Production bettered estimates in May on both an annual and monthly basis. However, manufacturing Production failed to meet with expectations. May’s manufacturing Production came in at 1.0% on the year, missing the median market forecast 1.8% output growth. On the month, May’s Manufacturing Production declined by -0.65 despite the market consensus of a 0.1% increase.
The NIESR Gross Domestic Product Estimate for June, due for publication later on Tuesday, has the potential to provoke Sterling changes. A good result will fuel speculation of a Bank of England (BoE) benchmark rate hike later this year, and could even see some policymakers dissenting from the pack during Thursday’s Monetary Policy Committee (MPC) meeting.

Euro (EUR)
The Euro is generally trending lower versus its major peers as traders await news from the Eurogroup meeting to discuss Greece. Given that Athens was only given hours to produce and submit fresh reforms, and with increasing reluctance to accommodate Greek debt relief despite the referendum result, the potential for a forced Greek exit has heightened significantly. Greece has now extended the unscheduled bank holiday and capital controls are showing no signs of ending any time soon.
European economic data is unlikely to be particularly impactful over the coming week with trader focus dominated by geopolitical developments. Prime Minister Alexis Tsipras has very little time to find a solution that will please the Greek people who voted against austerity, the finance ministers who hold the key to unlocking bailout funds and Syriza back benchers. The likelihood that a deal can be reached in such a short period is slim, especially given it took 5-months of negotiating to reach this point.

US Dollar (USD)
The US Dollar rallied versus its major peers despite Monday’s poor domestic data results which saw manufacturing output fail to meet with expectations. The ‘Greenback’ (USD) appreciation is the result of increased demand for safe-haven assets amid geopolitical turmoil in Europe. US Trade Balance and Consumer Credit data due for release later on Tuesday afternoon, has the potential to spark US Dollar volatility. However, even a very poor result is unlikely to see a huge ‘Greenback’ depreciation given that trader focus is firmly set on European proceedings.
As of Tuesday, 7th July 2015, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.405, GBP USD exchange rate was 1.546,

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