No deal for Greece

EUR/USD continues to suffer as Greece is still without a deal over its debt, and GBP/USD is being driven lower in the run up to Wednesday’s Federal Open Market Committee meeting. 

Euro and US dollar notes
Source: Bloomberg

Euro knocked by Greece

EUR/USD is under pressure yet again as no deal has been reached between Greece and its creditors. The meeting between Greek politicians and the EU officials ended without an agreement, and there are still 'significant gaps' between the parties. We are now in the middle of June, and the end of month deadline is creeping closer. If the country can’t unlock the next tranche of the bailout it will face bankruptcy.

Mario Draghi is speaking at 2pm (London time) in Brussels, and dealers will be paying close attention to what he says. Mr Draghi is addressing the European Parliament’s economic and monetary affairs committee, and volatility is expected to pick up during his announcement.

The lack of progress over the Greek debt crisis has pushed the euro lower in the past week, and the support at $1.10 is the target to the downside. The resistance at $1.13 is the initial target to the upside, and if it is cleared $1.14 will be brought into play; however, that mark currently seems a long way off.

Sterling slips overnight

The pound was trading lower overnight as confidence behind the dollar builds up ahead of the Fed meeting on Wednesday. As I mentioned last week, the US is edging closer to an interest rate hike, and even though no change of policy is expected at this meeting a rate hike in September is a possibility. We are now starting to see signs of US citizens spending, which remains a crucial factor in the Fed’s decision making.

This week the Bank of England will also give the voting breakdown of its latest meeting, and the market is expecting the usual 9-0 to keep rates on hold and the bond buying scheme unchanged. As the UK is in deflation it is difficult to see any member voting to hike rates.

GBP/USD has been in an upward trend since April, with $1.57 as the target, and a move through it will put $1.58 on the radar. If cable runs out of steam and fails to retest last month’s high it may revert back to $1.52. 

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