Sterling rallies to seven year high against euro

Thursday, February 19, 2015

Sterling rallied to a seven year high against the euro yesterday as a string of positive data releases supported the pound higher and uncertainty surrounding Greece’s bailout renegotiations kept the euro under considerable pressure. Investors were pleasantly surprised after yesterday’s release of UK labour market data which showed the three month ILO unemployment rate decline to 5.7% in December, below expectations of 5.8% and the lowest level in just over six years while wage growth outpaced inflation, growing at its fastest pace in almost five years as average weekly earnings increase 2.1% y/y during the last quarter of the year. The positive outlook prompted a 1.14% rally in sterling against the euro, touching a fresh multiyear high towards 1.3608 during yesterday’s session, however, markets struggled to hold on to these accelerated gains with the pound closing a more modest 0.66% up against the euro.

Eurozone officials will meet in Brussels today to discuss Greece’s request for a bailout extension. The plan, due to be presented later today by Athens is rumoured to follow a similar strategy to the previous requests which have already come up against significant resistance from the creditor nations. Negotiations have reached a stalemate in recent days with both sides unwilling to compromise and if this last ditch attempt to reach amicable terms fails and an agreement cannot be reached before the expiry of the existing bailout programme at the end of next week, we could see the possibility of the Greek government running out of cash as early as next month. The plan released yesterday includes a proposal to lower Greek budget surplus targets, scale back the privatisation programme and a promise to pay back €17bn owed to creditors by the end of this year.

Spot gold prices traded towards a six week low yesterday as hopes for progress regarding the Greek bailout saw investors pull out of the safe haven. The precious metal traded below $1,200/oz for the first time since the 5th of January, reaching a low of $1,197.72/oz during intraday trading before it became apparent that the situation between Greece and other eurozone members could potentially drag out until the end of the week. Prices ended the session modestly higher, gaining 0.2% to close $1212.42/oz and activity this morning has seen spot prices find firm support around yesterday’s close as they tentatively test resistance at the 100 day MA, trading as high as $1217/oz early on. Investors will be keeping a keen eye on how the situation in Brussels unfolds with increased trading volatility expected throughout the day. 

GBP rallies to a seven year high against the EUR

GBPEUR Curncy GBP EUR X RATE 2015 02 19 07 36 16

UK unemployment continues to fall

UKUEILOR Index UK Unemployment 2015 02 19 07 42 06

Gold prices spike lower on hopes of fresh Greek bailout terms

XAU Curncy Gold Spot Oz 2015 02 19 08 08 21

Events for today

CN Market Holiday 

0900

EZ

Dec

ECB Current Account SA

1330

US

w/e

Jobless Claims

1445

US

Feb

Philadelphia Fed Business Outlook

1500

EZ

Feb

Consumer Confidence

1500

US

Jan

Leading Index

1600

US

w/e

EIA Energy Stocks

Topics: Gold, ECB, EUR, GBP, Unemployment
More from: Kash Kamal