Bank Of England Minutes, UK Retail Sales & Why The Real Deadline For Greece is July 20

So far we have had a pretty steady start to the week for GBP exchange rates- We have seen the U.S Dollar claw back some strength from last weeks weakness, and the Euro begin to weaken off slightly as well.

First of all, the main topic is still Greece; 

Greece probably has until late July to come to an agreement with its creditors. Possible delays in payments to the International Monetary Fund shouldn't prompt the ECB coverage" class="tcb-autolink">European Central Bank to shut off vital liquidity to Greek banks. By contrast, a default on marketable debt, specifically the failure of the Greek government to pay 3.5 billion euros due to the ECB on July 20, would probably force the central bank’s hand. The Greek government and its creditors are still likely to reach a deal on a list of reforms before that crucial date.

Greek banks are relying on liquidity from the ECB to avoid financial collapse. That support is currently provided by the Emergency Liquidity Assistance scheme from the monetary authorities in Frankfurt.

In the event of a sovereign default, the banks, which are large holders of Greek debt, would probably be ruled insolvent because the value of the assets on their balance sheets would fall sharply. Under the rules of the ELA, the ECB would be unlikely to be able to continue providing liquidity to lenders in the beleaguered country -- users of the scheme must be solvent.

A more pressing concern is a payment to the IMF. Greece must pay about 774 million euros on May 12.

Still, a failure to make that payment would be unlikely to cause the ECB to cut off liquidity to the country’s banks. Since the ability to pay depends on the ability to reach an agreement on reforms, that might be considered a matter of liquidity rather than solvency, allowing the ECB to keep funding Greek banks. In addition, the IMF wouldn’t even have to make a public announcement about the country being in arrears until three months have passed since the missed payment, though the country is immediately shut off from the Fund’s resources.

So as you can see, though pressures are on Greece, they do still have time to come to an agreement with their creditors on a reform programme, which will put them back on course.

For the rest of the week we do have some economic data releases that may have an effect on the major currencies, first of all on Wednesday we have the BoE minutes coming out at 09:30am- recently we have had positive news coming from BoE governor Mark Carney in reference to how the UK is tackling the low inflation problem and that evidently our economy is moving in the right direction for a recovery. I think now we are accustomed to the fact that there will not be an interest rate hike in the UK in 2015, so this may be reiterated in these minutes which could put some weakness into the Pound. Another data release to look out for will be our retail sales figures on Thursday which are expected to come out weaker at 5.4% from 5.7%; my suggestion is that Wednesday may be the better day to purchase Euros or Dollars from Sterling.

We do also have positive jobless claims data expected from the U.S on Thursday which further reiterates my statement above for clients purchasing the Dollar; there is also a heap of data coming out of Europe both on Wednesday and Thursday which are expected to come out strong which could put some strength back into the Euro.

As ever, if you have any requirements that you would like to discuss with me further then please do not hesitate to contact me directly at prem.raja@currencies4you.com or you can call me on 01322 319 550