Europe Warned Again About Greek Default

On Saturday, European Finance Ministers came to an agreement that “the fifth tranche of the current Greek loan facility by July 15 following approval by the IMF board” and that a new financing plan for the country would be put into place. The IMF subsequently agreed to “consider” the disbursement of the next round of funds.

Crashing the party however has been Standard and Poor’s who opined this morning that they may have to place Greece in a selective default if the French plan of rolling debt out for up to 30 years is enacted. Unfortunately, according at least to ECB member Christian Noyer, there is no Plan B and Greece must agree to this plan. Thisdid push the euro lower on publication (at around 0600 BST this morning) but euro has since regained the lost ground as the focus will now move to the ECB’s rate decision on Thursday where we expect a 0.25% increase in the base rate.

There will be no such move from the Bank of England on Thursday however as the UK economy remains weak. Figures showed that UK manufacturing PMI fell to 51.3 in June from 52.0 in May which was below the expected number of 52.3. This left the index at its lowest level since September 2009 amid falling new orders although the price elements of the index did show some signs of weakening given the fall in commodity prices, especially oil, in the past few weeks. Sterling slipped on the number before regaining its composure late in the day to finish the week higher against the USD by 0.6% but lower by 1.78% against the euro.

Things will be relatively sedate we would expect today given that it is Independence Day in the United States but we do have news from the UK. UK construction PMI is due at 09.30 and like the manufacturing number disappointed on Friday we expect a similar disappointment from the builders amongst us. The key number is the services number tomorrow which, given retail and consumer confidence numbers, is likely to also be poor.

Indicative Rates Sell Buy
GBPEUR 1.1077 1.1097
GBPUSD 1.6109 1.6128
EURUSD 1.4524 1.4544
GBPJPY 129.75 129.94
GBPAUD 1.4992 1.5019
GBPNZD 1.9404 1.9428
GBPCAD 1.5457 1.5480
NZDUSD 0.8294 0.8309
GBPZAR 10.82 10.87
USDZAR 6.7195 6.7483
GBPPLN 4.3633 4.6856
EURJPY 116.94 117.27

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