Bad day for Sterling

Wednesday’s trading saw the pound lose ground against all other currencies despite a lack of economic data. The selling of the pound underlines that the UK is by no means immune to the on goings in Greece and the potential aftermath as investors continue to seek more assured positions in the likes of the Japanese Yen and US Dollar, both of which have gained considerable value in the last week. GBP/EUR has failed the 1.40 resistance yet again and could open up a downward slide towards 1.30 if a late deal is done with the Greeks.

The latest update from Greece is a promise from the Prime Minister that his government will submit a credible reform proposal to its creditors today, ahead of tomorrow’s deadline in what is now the final attempt to agree a deal that will keep Greece in the Euro. A Grexit is viewed as a terrible failure for all involved and the desire for an agreement to be made is as strong as ever leading into the emergency summit meeting on Sunday. Buyers be aware that if a deal is done, the Euro is poised for a strong rally off the back of this potential news and so buyers of the Euro may wish to consider locking in rates before the weekend to eliminate this increasing risk.

The UK trading session was absent of any data with the budget taking centre stage, all be it a non event for the currency markets. Headline changes from the new budget was an increase in inheritance tax threshold and a slash to many benefits for low paid workers, compensated by a rise in pay for these individuals.

The main currency event of the day had to wait until 7pm last night as the Federal reserve delivered their monthly FOMC minutes from the interest rate decision earlier this month. As expected rates were held at their record low of 0.25% however the latest minutes indicated that 1 of the FOMC members was ready to hike rates in June, with the rest all agreeing that more evidence of a stronger economic growth was needed before a rate hike could be implemented. The US Dollar came under some minor selling pressure following the announcement but this news is unlikely to reverse the Dollar’s current strong run.

Overnight also saw latest unemployment figures for Australia which again were very positive and better than expectations, helping the Australia fight back after a particularly poor run in recent weeks. Today is interest decision for the UK at 12pm, with no change expected and votes forecast to be unanimous against any rate hike for another month.