UK
The pound lost out against US Dollar as optimism over the Greek elections was short lived. GBPUSD moved around 0.5% from its high of 1.5718 to close the day at 1.5651.Against the euro the pound did better moving off a recent low of 1.2341 and peaking at 1.2145 as initial confidence in the in the Greek election quickly vanished.
On a quiet day for UK data Rightmove said that UK asking prices rose by 2.4% in the past year. It did also point out that this rise is not in line with inflation and expected a decline in the future.
UK inflation data this morning surprised the markets coming in below expectation dropping to 2.8% year on year from 3%. At the same time the retail price index fell from 3.5% to 3.1%. Sterling lost ground off the back of this data.
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WORLDWIDE
Market’s had initially cheered the pro-bailout Greek election win but concern over the implementation on a manageable plan that a coalition government can agree on, new austerity had a major impact on market confidence in afternoon trading.
S & P today issued its verdict on the Greek election, saying that it will have no immediate effect on Greece’s ratings. But, the agency did add that while the short-term risk of Greece leaving the Eurozone may have lessened, it still sees at least a 1 in 3 chance of its exit in the medium-to-long term.
As the political crisis in Greece continued to be a major concern for the Eurozone, Spain continued to lose credibility in the bond market. In a sign of continued jitters over the euro debt crisis, Spanish 10 year bonds jumped to 7.1%. Spain has also delayed the much anticipated banking audit until September.
Against the US dollar, the euro dropped from a high of 1.2724 to close the day at 1.2582 as German Chancellor Merkel spoke at the G20 summit in Mexico. Merkel said that Greece had to stick to the bailout package, causing day lows across the whole Eurozone but in particular Spanish, Italian and Greek stocks.
The Euro continued to hit recent lows against the Australian Dollar, hitting a 4 month low this morning breaking the psychological level of 1.25. Since June the 4th EURAUD has fallen from a month high of 1.2858 to 1.2425.
The move came after the release of the minutes of the Reserve Bank of Australia’s interest rate decision meeting earlier in the month where it was decided to cut interest rates by 25 points, from 3.75% to 3.5% – in line with forecasts. This comes after a 50 basis point cut in May from 4.25%. On deciding to cut rates in June, the board members said that the action would provide stimulus for the coming months.
Homebuilder confidence in the US has seen a modest improvement in the month of June. The report showed that the NAHB/Wells Fargo Housing Market Index crept up to 29 in June. Economists had expected the index to come at 28 as reported last month.
India’s central bank decided to leave its key interest rates unchanged, saying that another reduction could worsen the inflationary pressures amid the weakening economic growth.
Fitch Ratings cut India’s rating outlook to Negative, citing the heightening risk of economic growth deteriorating further if measures are not taken to improve operational environment for business and investment.
