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Declining patience with Greece

Two events are dominating the outlook for today. The first is Greece; the second is the impending UK election. With regards to Greece, repayment of EUR 200 mln loan to the IMF is due today and the ECB is due to decide on the provision of emergency liquidity assistance to Greek banks, who are suffering on the back of the deposit outflows. It’s fair to say that the situation is a car crash waiting to happen, it’s just not clear when it will happen and how many causalities there will be. The single currency has started the session firmer, holding above the 1.12 level, but is likely to be sensitive to some of the headlines today.

With regards to the UK election, voting takes place tomorrow, with the results filtering through on Friday. The polls are still too close to call, so the volatility for sterling is likely to be seen through Friday, the same day as the US employment report. Looking beyond these factors, the stand-out in recent session has been the rise in bond yields, especially in Germany, given the move from below 0.10% to above 0.50% on the 10 year yield. These longer dated yields matter less for the currency, but it has still been a factor in offering some support to the single currency. Note that final services PMI data for the Eurozone is seen today, with the US focusing on the release of ADP employment data to give a lead (or otherwise) to Friday’s numbers.

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