Daily Market Brief – 15th July 2015

Pound breaches 1.42 Vs. Euro

Quote of the day: “Don’t be afraid to give up the good to go for the great”

July 15th: Highlights

  • GBP/EUR breaches 1.42
  • Better USD rates in sight for buyers
  • Greek banks might stay closed for a month
  • Dollar steady against the Euro
  • AUD/USD rises on upbeat China GDP

Sterling Comment

Earlier today, GBP/EUR crossed 1.42. Despite a slight pullback, we’re still flirting with this significant level. Sterling strengthened on the Bank of England’s interest rate warning from Marc Carney when he told the Treasury Select Committee that the UK must brace itself for higher interest rates.

At the meeting, Carney warned, “The point at which interest rates may begin to rise is moving closer with the performance of the economy, consistent growth above trend, a firming in domestic costs, counter-balanced somewhat by disinflation imported from abroad”.

His comments were rather unexpected and Sterling strengthened despite data showing UK inflation returning to zero last month (down from 0.1% in May) and forecasts suggesting a risk of deflation in the short-term. The BoE expects inflation to rise ‘notably’ towards the end of the year, but with the data dependency of any interest rate move, we feel there is still some way to go before the rates start to rise.

GBP/EUR levels above 1.42 have not been seen since the first week of July, with further gains notoriously hard to come by.

GBP/USD also surged off the back of the Bank of England’s remarks, currently trading above 1.5659. Watch out for both the US Producer Price Index and UK unemployment data, both set to be released today and can impact on Sterling US Dollar exchange rates.

Greeks seek approval in Parliament

It’s a massive day in Greece, as Members of Parliament will vote on whether to approve the third bailout. Prime Minister Tsipras said that banks may not reopen until the bailout deal with it’s Euro ‘partners’ is finalised, which could take a few weeks.

The Greek politicians are entitled to vote and will decide whether to approve a three-year bailout worth in the region of EUR86 billion. This is the country’s third rescue programme in five years.

Here’s a little joke for you – what have I got in common with Greek debt? We both need a haircut. But what’s the difference between my haircut and the Greek haircut? Greece really needs a mullet – chop a lot off the front and load it up at the back.

But all coiffure commentary aside, there is increasing commentary that debt restructuring is the only real viable solution to help Greece recover. Their debt (like my barnet) is unmanageable and needs help. An IMF study, leaked to Reuters, suggested that Greece might still need capital controls, even if a new bailout deal is passed, because of the economic damage caused by the last two weeks of capital controls. This further underlines the need for a haircut on Greek debt to help short-term recovery.

If you are a Euro buyer or seller, log on to compare live quotes at this volatile time OR get in touch with your Personal Currency Concierge. It pays to let us shop around for you.

Global Comment

The US Dollar held firm against the Single Currency and the Japanese Yen in today’s earlier trade as investors look forward to the testimony on monetary policy by the Fed Reserve chair Janet Yellen later today. EUR/USD is at 1.10, holding slightly below yesterday’s highs of 1.1083.

The Greenback weakened against the other major currencies yesterday following poor US retail sales data, which saw a drop of 0.3% in June versus analyst expectations of a 0.2% increase.

The Aussie Dollar surged against the US Dollar in today’s early trade, in large part down to strong Chinese second quarter growth figures. China GDP rose by an impressive 7% in Q2, trumping forecasted growth figures of 6.9%. AUD/USD hit 0.7489 in the late Asian trade, the highest figures since July 10, with the pair consolidating at 0.7468, seeing gains of 0.20%.

Have a great day!

Morning mid-market rates – The majors
48-GBP GBP > USD 147-USD = 1.5653
48-GBP GBP > EUR 45-EUR = 1.4191
45-EUR EUR > USD 147-USD = 1.1030
45-EUR EUR > GBP 48-GBP = 0.7046

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Paul Plewman

Paul Plewman
Director of Sales & Operations
t: +44 (0) 20 7096 1036
e: paul@currencytransfer.com


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