Greek clarity fails to move EUR/USD

Currency markets look unsurprised by developments surrounding Greece as Germany appears to be getting its way. 

Euro and dollar notes
Source: Bloomberg

Euro remains rangebound

Greek finance minister Yanis Varoufakis tried his hardest to play hard ball with the Troika and get the best deal possible for Greece; however, it always looked likely that the reluctance of Germany to show any real flexibility would ultimately come out on top.

Compromise was always going to have to come from Syriza, who must now go back to the Greek public with the less-than-impressive news that austerity is there to stay for the time being.

The bigger picture is that the Eurozone remains intact, and any encouragement other countries might gain for trying to force greater flexibility is diminished.

As well as developments coming out of Greece we will also hear from Mario Draghi today. Although he is not expected to discuss Greece or the European Central Bank’s current tactics, this is still likely to come up.

As my colleague David Madden pointed out yesterday, EUR/USD remains in tight range between $1.13 and $1.1375. 

Spot FX EUR/USD chart

GBP/USD near overbought territory

Today will see Mark Carney attend the latest inflation report hearing. For market watchers the scholarly style with which the governor handles the sometimes less-than-fully-educated questions from Parliament’s Treasury Committee makes for good watching.

Fundamentally we are unlikely to hear anything different from the last hearing as the inflationary pressures that were in place then are by and large unchanged. Oil prices have edged higher, however, and still remain at low levels, and the growth in public spending and demand has yet to move into a higher gear.

This afternoon Federal Reserve chair Janet Yellen will speak for the first time at the two-day US semiannual monetary policy report meeting in front of the Senate Banking Committee. It will be interesting to see if there is any change in tone regarding interest rate rises following the developments in Europe.

Similarly to EUR/USD, the GBP/USD price has found itself in a lateral channel as it has waited for the European picture to become clearer. The implications for the UK are stark, as the eurozone is still the UK’s largest trade partner and any further issues will have knock on effects on the UK economy.

GBP/USD continues to hover at the top of its relative strength index channel and is perilously close to moving into overbought territory. This, coupled with the looming 100-day moving average just above current levels, could well be enough to cap this recent move higher.

Spot FX GBP/USD chart

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