Monday, 13 July 2015 17:30
LONDON: Sterling strengthened against the euro on Monday, as the single currency weakened across the board after Greece and its European creditors reached agreement on a new debt deal for Athens.
There are no major UK economic data releases, events or policymaker speeches scheduled for Monday, leaving the pound largely at the mercy of the euro’s fluctuations.
Euro zone leaders clinched the deal, which keeps Greece in the euro zone, after a whole night of haggling at an emergency summit in Brussels.
“The content of the deal may not be quite as positive as the headline,” said Neil Jones, head of hedge fund FX sales at Mizuho in London, on why the euro had reversed initial gains.
Traders also bet that the deal will mean monetary policy differentials will weigh on the euro again, with the European Central Bank continuing its 1 trillion euro quantitative easing bond-buying programme and the US Federal Reserve inching closer to raising interest rates.
This pushed the euro down 1 percent against sterling to 71.20 pence, a one-week low. The pound was unchanged against the dollar at $ 1.5525. On Wednesday last week, sterling hit a one-month low around $ 1.53.
From a technical perspective, near-term support for euro/sterling lies at 71.00 pence, while cable might need to fall back to $ 1.54 before re-testing the highs at $ 1.59, according to CMC Markets. The pound may take a cue from UK inflation figures on Tuesday and earnings growth data on Wednesday.
The Bank of England kept its benchmark interest rate at the record low of 0.5 percent last week as policymakers grapple with how to balance Britain’s improving wage growth against more ominous signals from the global economy.
Strategists are split over when the central bank will begin increasing rates, although the consensus is for the middle of next year.
