Greece had a deadline of 10pm to submit their new debt reform proposals, and they used every second allotted to them. So the worsening weakness in the Euro throughout yesterday correlated precisely to investor confidence as the deadline approached.
But at 10pm the proposal was released, and it seems some middle ground was finally found, strengthening the Euro back down into the 1.38’s this morning before UK trading had even begun.
According to Greek media reports the measures submitted include: unifying VAT rates at a standard 23%, phasing out a solidarity grant for pensioners by 2019, and €300m defence spending cuts by 2016.
One of the main points of contention during the Greek talks has been their pension schemes. So while this is not a reduction in the pension scheme, and it is not even close to being implemented, it is a start. But Mr Tsipras is asking for a lot in return – a bailout total of €53.5bn.
But there is a lot of movement for both sides on this, asking for a larger amount from the Eurozone is not necessarily an issue, as it will be paid in stages. Similarly Greece will not have to worry about pension changes for another 3 years. Which is why markets have reacted well to the proposal, on the surface it appears there is some middle ground so neither side is ‘losing face’, but it is much more palatable than it appears.
We are now waiting for the proposal to be debated by the Greek Parliament today, and all 28 EU leaders over the weekend. While these talks have produced surprises in the past it seems neither side can afford not to compromise at this point. Greece has little to negotiate due to their current cash crisis, and the EU cannot deny Greece financial aid without incurring a PR nightmare.
So I believe some form of deal will be reached. But whether it is a long-term solution or a short term fix still needs to be debated. In either case, the Euro will likely strengthen further than it has this morning, creating long-awaited opportunities for Euro sellers.
To see how trading levels are affected throughout today you can follow our live foreign exchange rates page or contact your broker to stay in touch whilst the talks proceed.
Yesterday Sterling recovered some of the ground lost against the USD this week, reaching as high as 1.542. With the Greek crisis causing investors to fly out of the Euro into ‘safe haven’ currencies in the short term, the Pound and the USD have been the main beneficiaries.
But it seems the USD has been favoured more heavily than Sterling, due to the US’s relatively lower dependence on the Europe for its own economic stability. This is why the USD has been gaining this week, but it seems that momentum has stalled.
While the Greek crisis will be the main driver of rates over the weekend, the world does still go on, and there will be some data releases to watch out for. Yesterday, figures showed that the amount of people in the US claiming unemployment insurance increased by 297,000 last month. With Janet Yellen, the head of the FED, speaking this afternoon, such poor figures do not set the stage for an inspirational speech outlining the state of their economy. The dovish tones expected this afternoon will most likely weaken the Dollar further, so those looking to sell USD this morning should get in touch to avoid disappointment.
To take advantage of a specific economic event it is important to keep in touch with your account manager. Call direct to our dealing floor on 01494 725353 or email me at firstname.lastname@example.org to keep up to speed with the latest market movements.
Those hoping that GBP/CAD rates were journeying towards 2.0 received an abrupt halt to their ambitions this week, when rates moved back to 1.94 after being in the high 1.97’s. This was a surprise to most, as housing data released between Tuesday and Thursday this week suggested a severe slowdown in construction activity, and should have weakened the Canadian Dollar further.
Again it is a similar story as with other Sterling currency pairings. Greater confidence in the Euro following positive Greek talks has halted the capital flying into Sterling, so this largely artificial strength of the Pound has deflated and rates are back where they were a few weeks ago.
Today unemployment figures for the Canadian economy will be released. They are expected to rise by 0.1%. There are arguments for the figures improving and coming in worse than expected. While the oil industry has been hit hard in recent months, Canada is currently experiencing a manufacturing boom to compensate.
Would not hesitate to use again, Joshua from FCD looked after us very well and we were able to get a good rate of exchange, the whole process was very quick and painless.
This was a faultless service from start to finish. Our contact, Joshua, could not have been more professional and efficient. He guided us excellently through all the stages of transferring money to the UK. Joshua even managed to get us the best exchange rate available at the time, and he did this with a pleasant manner and exceptional politeness.