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Leaked Greece Exit Plans Lead To Euro Rate Movement

28 July 2015

The Pound got off to a slow start against the majors yesterday but demand grew during the afternoon ahead of this morning’s UK GDP report. The data due for release from the Office for National Statistics (ONS) is tipped to show an encouraging acceleration of economic activity in the second quarter. British GDP printed at 0.4% in Q1 but markets anticipate a much better score of 0.7% for Q2. The report is likely to have a significant impact on sentiment towards Sterling this week as a soft figure could potentially delay the Bank of England’s plans to tighten monetary policy but a strong score could persuade policymakers to hike before the year is out.


As details emerged of a plan hatched by former Greek finance minister Yanis Varoufakis to prepare for a potential exit from the Eurozone, the Euro exchange rate – now buffeted by the relatively strong chance that the Hellenic Republic will not be leaving the currency bloc – rose to a fortnightly high against the Pound.

The so-called ‘Plan B’ involved hacking the nation’s payroll system in order to copy pin numbers so that a parallel banking system could be setup in the event of Greece leaving the Euro and returning to the Drachma. The leaked plans caused quite a stir in Greece, where opposition parties accused Syriza of plotting to leave Europe. However, PM Alexis Tsipras dismissed the reports and assured the nation that it was only a plan of last resort had the debt talks gone even worse than they actually ended up going.

Holders of the single currency did not seem bothered by the revelation and GBP/EUR declined by around -120 pips.

US Dollar

‘Cable’ closed for the day around half a cent stronger than it started even though US durable goods orders came in strongly yesterday afternoon.

The durable orders report is considered an important barometer of business sentiment because the high-priced items included in the data are deemed large investments that firms are more likely to make when they expect demand to increase. Markets had been primed for a score of 3.2% but the actual result showed an even better increase of 3.4%. However, the Pound to US Dollar exchange rate bounced higher ahead of this morning’s UK GDP report which could, if it impresses, put the Bank of England on track to start raising interest rates at the same time as the Federal Reserve.

Canadian Dollar

Sterling maintained a sturdy exchange rate against the Canadian Dollar yesterday, gaining a further 25 pips as last week’s commodity selloff continued with a new three-month low in the value of crude oil. The latest dip in ‘black gold’ helped bring an index of global commodities down to a fresh 13-year low and this negatively impacted the risk-sensitive ‘Loonie’.

Australian Dollar

A shock -8.5% plunge in Chinese stocks and shares consigned the benchmark Shanghai composite index to its worst daily performance for eight years on Monday. This unexpected rout also had an impact on the Australian Dollar, owing to the fact that China is the largest buyer of Australia’s raw material exports. Sterling jumped to a fresh six-year high yesterday as risk aversion trends worked in the Pound’s favour against the ‘Aussie’.

New Zealand Dollar

Profit-taking helped drive a mini-recovery in the New Zealand Dollar yesterday, despite the heightened sense of risk aversion stemming form the latest stock market crash in China. It was reported that the selling of shares was suspended at over 1,500 companies yesterday on account of them suffering a -10% daily decline. Somehow, the ‘Kiwi’ Dollar managed to eke out a one-cent gain versus the Pound.

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