Important developments across multiple fronts over the past 24 hours and the currency markets were pretty vocal in their response to the fresh news. We’ve seen increased volatility in the major currency pairs as traders are looking to take advantage of any fresh developments in the Greek issue while at the same time the British Pound was also in the forefront after the release of the Production reports yesterday.
Starting with the Greek negotiations that were scheduled to recommence yesterday, the situation seems to go from bad to worse with every new day. The Greek side was supposed to come up with its proposal during yesterday’s Eurogroup meeting but instead they let everybody know that they will submit their ideas today. However the rest of the Eurozone members were pretty clear in their message after the meeting: you either agree to a plan of reforms along with a new funding plan by Sunday or you go down the Drachma path.
The Euro suffered by the new ultimatum from the European countries to Greece and dropped to hit almost 1.0900, however by the end of the day the currency recovered and traded back above 1.1000. We consider this a technical recovery as the Single currency has been strongly oversold and the bias remains on the downside. It will be important to see how the European states will react to the proposed agreement plan that the Greeks will submit today. Any fresh pressures should send the Euro towards yesterday’s 1.0920 lows so we need to keep an eye out for any news or comments from Brussels.
The Cable was pretty active over the past 24 hours but the news was not good for the British currency as the release of the Production reports weighed down on it. The Industrial Production figures printed slightly better than expected but what dragged the Cable lower was the miss in the Manufacturing Production report that printed far worse than expected.
That along with traders’ doubts whether the BoE will move forward with raising rates early in 2016 as the sentiment in Europe worsens sent the Cable to trade almost as low as 1.5400. We have little to expect in terms of fresh news from the UK until Friday so the Cable could recover slightly from here with the 1.5500 barrier being the important pivot level. The sentiment remains bearish so while we’re trading below that the Cable could see more losses.
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