The Euro climbed to its highest level in a week against the Dollar as investors become more confident that Greek Prime Minister George Papandreou will win the confidence vote later today. If he does win, he will be able to to secure backing for strict austerity measures which need to be put in place if Greece is to receive more loans from the troika. Earlier in the session, the Euro initially dipped after the German Zew Economic Sentiment Indicator was released lower than expected minus 9.0 points. This value is below the indicator’s historical average of 26.3 points possibly affected by the Greek debt crisis, showing that German investors in June took their most bearish view about the Euro zone’s largest economy in over two years. EURUSD peaked at 1.4387.
Sterling was hurt after Britain ran up a record budget deficit in the first two months of the fiscal year despite a slightly larger than expected drop in borrowing in May. After the release of the economic data, Bank of England policy maker Paul Fisher gave a dovish speech and flagged the chances of more quantitative easing in the UK after public finance data painted a dismal picture of the UK’s fiscal position. Fisher said Britain’s economic recovery remained fragile and more monetary stimulus could be required if deflation risks mount. His comments caused a GBPUSD sell off, causing the pair to dip 67 pips to 1.6166 before rebounding slightly.
The Swiss franc moved further away from the all-time high hit against the Euro on June 16 as market sentiment became more optimistic on the belief that the Euro zone will find a solution to prevent a Greek default. Recently more steps are being taken towards this goal, and the upcoming Greek confidence vote seems to weigh in favour of a win for Papandreou, so the level of uncertainty that used to prevail in the market seems to have diminished, with the safe haven Swiss Franc losing its demand. EURCHF rose from 1.2094 to highs of 1.2135 in the European Session. Meanwhile against the Dollar, the Swissie rose 0.3 percent. Market players are awaiting the outcome of a policy meeting of the U.S. Fed, its first since U.S. economic data started to take on a decisively weaker tone. This has affected the US Dollar.
The Dollar fell against the Japanese Yen. USDJPY dipped from highs of 80.22 to 80.04. The pair is mostly affected by US fundamentals such as the delayed US recovery. The markets are anticipating continued monetary easing by the Federal Reserve and this is helping support the Yen against the greenback.
Note: Daylight Saving Time in effect for GMT