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UK growth data, US retail sales and Greek discussions influence exchange rates

Last week, both the pound sterling to euro (GBP/EUR) and pound sterling to US dollar (GBP/USD) exchange rates closed out the week trending in a softer position. While negative manufacturing and services reports for the UK weighed on the pound, the euro was buoyed by comparatively upbeat domestic data and the news that Greece didn’t default on its payment to the International Monetary Fund (IMF) on Friday.

Meanwhile, the US dollar surged against a number of its peers in response to a better-than-forecast US non-farm payrolls print. The sturdy 280,000 increase in positions smashed projections and put a September rate adjustment from the Federal Reserve back on the table.

At the start of a fresh week of trading, the pound was largely holding declines as the Confederation of British Industry (CBI) negatively adjusted the UK’s growth forecasts for this year and next and Moody’s intimated that an EU referendum could put the UK’s credit rating at risk. Although the economic calendar is pretty sparse this week compared to last, there are a few things to be aware of.

Here are the week’s three main exchange rate-moving events:

Greek discussions

While Greece didn’t default on Friday’s debt repayment to the IMF, it didn’t pay the EUR 300 million either and instead deferred payment until the end of the month. While this initially lent the euro support, relations between the Hellenic nation and its creditors have since taken a turn for the worse and investors now fear that Greece will default on the much larger payment due at the end of the month. Discussions taking place over the course of this week will be closely attended to and any positive progress could boost the Euro.

UK GDP estimate

There are a couple of UK economic reports with the potential to trigger pound sterling exchange rate movement this week, including trade balance figures and manufacturing/industrial production numbers. However, the National Institute of Economic and Social Research’s (NIESR) GDP estimate for May will perhaps be of the greatest interest. Given that the UK economy was shown to have expanded by a disappointing 0.3 percent in the first quarter of the year, investors will be hoping for a rebound in the second. Less-than-impressive data for May would weigh on BoE rate hike bets and could have a detrimental impact on sterling.

US advance retail sales  

With the 5 June 2015 US sales data supporting the case for a September rate increase from the Fed, investors will be looking for this week’s consumer spending number to raise bets further. US advance retail sales are believed to have risen by 1.2 percent in May after stagnating in April. Such a strong increase would probably push the US Dollar higher against peers like the pound and euro.



Contributed by TorFX


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