Greek war of words escalates

Both sides have heightened the rhetoric and continue to blame a lack of flexibility on each other.

Greek flag
Source: Bloomberg

Capital controls a possibility

Considering all the comments we have heard in the last 48 hours from both sides of the debate between the creditors and the Greeks, EUR/USD has remained remarkably calm. Overnight opinion polls in Greece clearly show the public believe it is the ECB and IMF who are being inflexible rather than their government when it comes to a lack of progress in discussions.

Without any real pressure from its own voting public, Syriza looks unlikely to improve the last offer that it tabled and a stalemate looks inevitable. German politicians have already stated that if nothing is agreed by the weekend capital controls will be readied.

Part of the reason that EUR/USD's rate has remained stable is the fact that the presence of Greece has helped devalue the currency, and any default would take it a step closer to leaving the union. From now until the weekend we can expect lots of speculation and conjuncture but precious little in the way of facts — the perfect environment for a little volatility.

Traders await MPC vote

GBP/USD is currently sitting on the sidelines with a watching brief as the shambles that is the eurozone unravels. Once again the trajectory of GBP/USD is higher as it breaks above $1.5600 and heads towards the mid-May highs of $1.5800. This latest move has seen the currency cross flirt with breaking above the overbought relative strength index indicator but that does not appear to be dampening bulls’ enthusiasm.

We are due to see the latest releases of the UK’s inflation figures this morning as both the consumer and retail price indices are called to come in higher. I mention this because I feel obliged to rather than because I believe it will have an impact, but the Monetary Policy Committee will be announcing how the latest voting went. It will be a surprise if it is not once again 9-0 in favor of keeping rates unchanged.

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