The Euro appeared to be in the driving seat last week as talks with Greece and its creditors intensified. Any indication of a resolution has helped the single currency gain momentum and with last weeks news showing some positive developments, the single currency managed to put pressure on its counterparts.
Donald Tusk (President of the European Council) yesterday cancelled a scheduled emergency summit of 28 countries in order to allow Eurozone leaders one last chance to reach a deal with Greece. In spite of a successful anti-austerity mandate in last weekend’s referendum Alex Tsipras (Greek Prime Minister) will have to push through new reforms and tax measures which contradict the consensus of the referendum. Greece has been given until the 15th July, to accept the new tougher reforms, in order to access further funding and begin negotiations of a bailout for the third time and in turn avoid financial meltdown. It seems that Tsipras will now either have to bend over and accept propositions, which were previously resisted or simply quit the Euro.
Talks between Alex Tsipras, Angela Merkel and Francois Hollande have continued through to this morning. Tspiras is still resisting two of the creditors demands one is having the IMF (International Monetary Fund) involved in a proposed three year bailout and the other is moving €50bn of Greek assets outside of Greece to serve as collateral for fresh loans.
A temporary ‘Grexit’ has also been introduced as part of the proposal, something which German Chancellor Angela Merkel is in favour of. This will consist of Greece being given a 5 year time out from the Euro. The French have opposed the idea by making it clear that their intentions are to keep Greece within the Eurozone no matter what, this in turn has created some tension between Germanys Angela Merkel and French President Francois Hollande.
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A spokesman for the Cypriot government Nikos Christodoulides has tweeted that an agreement has been reached! Details of the agreement have not yet been made clear.
It is highly likely the Euro is going to gaining some strength now so if you have Euros to purchase it may be worth calling your broker to avoid substantial losses.
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The US Dollar made healthy gains against most of the major currencies last week as investors looked to safe haven currencies following a volatile week of trading. Dollar exchange rates are likely to be dictated by the situation in the Eurozone this week although there will be several significant data releases those with Dollar based currency requirements should keep an eye out for.
This evening we will see The Monthly Budget Statement for June which will summarize the financial activities of federal entities, disbursing officers, and Federal Reserve banks. A positive statement will be seen as bullish for the Greenback, and a negative figure which indicates government debt, is seen as bearish. Retail Sales at 12:30pm tomorrow which is expected to show a sharp fall in consumer spending may also put some pressure on USD exchange rates. On Thursday Janet Yellen will release a testimony on the current economic situation and the policies needed to be taken in order improve it. Janet Yellen last Friday indicated, in a speech delivered to the City Club of Cleveland that the Fed will raise interest rates sometime this year saying I expect that it will be appropriate at some point later this year to take the first step to raise the federal funds rate. Changes in interest rates impact heavily on currency and any indication of a possible interest rate hike will encourage Dollar strength. Friday afternoon we will see Consumer Price Index released which is also known to encourage market movement.
The close of business on Friday saw the Australian Dollar fall by around 1.45% against the Pound. This was mainly due to low gold and iron ore prices weighing on demand for the Aussie Dollar. With the Aussie being a commodity-linked currency it has gone from one extreme to another in the space of a few years as investors look to buy in to safe haven currencies such as the Japanese Yen and the US Dollar.
With Greece on the verge of financial meltdown, historical losses on the Shanghai stock exchange (China is Australias largest trading partner) and continuing concerns regarding global growth analysts expect the Australian Dollar will continue its downward trend. Stay smart and ensure you limit your exposure to further fluctuations by keeping in touch with your broker on 0800 328 5884 or emailing me personally on email@example.com.
Those with Aussie based requirements should keep an eye on Westpac Consumer Confidence on Wednesday and Consumer Inflation Expectation on Thursday which may provide some short term relief for those selling Aussie Dollars.
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