Currency expert, Moneycorp, offers an insight into the fast moving world of foreign exchange.
The Grexit has been the main talking points for the Markets in the UK for the last few weeks. As of today, talks are still on-going, with uncertainty around whether a solution will be found which will enable Greece to stay within the Euro Zone, or failure will result in them being the first country to leave since the Euro started back in January 1999. Sterling has strengthened this month to a high of €1.4168, a rate not seen since August 2007. The deadline has been set by Angela Merkel for an agreement to be made by the time markets open on Monday 29th July, and with €5bn owed by the middle of July, Greece are in desperate need of the €7.2bn bail out! Greece are now holding out for the in/out referendum next weekend, so with the banks and stock markets closed for the week, and cash withdrawals limited to €60 per day, it’s a week of uncertainty for the Greek people and their economy!
The UK employment data, which were decent enough in the round, included the surprise news that wages were up by 2.7% on the year. The pound shot higher. It was not the outright leader, having to concede first place to the Norwegian krone, but it strengthened by 0.7%.
US retail sales went up by a monthly 1.2% in May, a stronger outcome than the 1.1% increase forecast by analysts. Sales excluding cars were also better than expected, rising by 1.0%. But investors did not see the numbers as a reason to buy the dollar.
The Norwegian krone was the weakest of the bunch, falling by -1.7% and the South African rand did almost as badly with a -1.2% drop.
The North American dollars' gain was the rand's loss. It fell to an all-time low against the pound and a 13-year low against the US dollar after the jobs data came out. Other emerging-market currencies suffered too, the logic being that the strong data increased the likelihood of higher US rates this year and threatened the flow of outward investment.
Analysts had forecast a 226k rise for US nonfarm payrolls for May. The actual increase was 280k and a further 22k jobs were added to the previous two months' data. The total was therefore 76k more than investors had expected; an overshoot of 57%. The market's reaction was swift and dramatic, with the dollar strengthening by an instant cent against sterling and by more than that against the euro.
The Canadian dollar was helped by the US number and helped even more by its own employment data, which came out at the same time and showed employment rising by 59k, six times as many as predicted.
Japanese inflation was reported earlier to have slowed to 0.3% despite household spending rising by an annual 4.8%. French consumer confidence rose by a point to 94 and Italian consumer confidence is expected to be steady.
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Ian Brown, Chamber FX
Mobile: 07920 831148