• Fed minutes and Greece push EURUSD lower
  • Sterling rallies after BOE minutes
  • Canada GDP growth is flat
  • Aussie waits on Fed

Markets are very sideways as we open up the day. We have seen some euro weakness and a brief rally for the pound, but elsewhere, things are quiet.

Greece obviously remains a catalyst for weakness in the single currency. The euro was helped lower this morning based on comments from the Speaker of the Greek Parliament saying that the payment to the IMF due on June 5th – worth EUR310m – would not be paid if a deal with its lenders had not been reached. Repayments in June total EUR1.7bn. It seems the clock has been set – 16 days until Greece runs out of road.

This has only added to the losses we saw yesterday, courtesy of the Fed’s ‘frontloading’ of some bond buying through the summer.

Overnight, the Japanese economy was shown to be growing at 2.4% on an annualised basis in Q1. That works out to 0.6% on the quarter. A pick up in investment and a rebuilding of inventories since last year’s recession are the main drivers, although the latter is hardly a bullish mover going forward. Consumption growth is needed to make sure those inventories are, in turn, depleted. USDJPY got above 121 in the aftermath of the announcement and remains higher on the session.

Sterling is also higher this morning from some hawkish noises within this month’s minutes. News that the central bank believes that the slack in the labor market will be absorbed within the year and that inflation should rise by Q4 are nothing new. A lot of this was telegraphed at last week’s Inflation Report and it now looks likely that the hawks on the MPC – Messrs McCafferty and Weale – will vote for rate hikes as early as next month.

This afternoon’s minutes from the Federal Reserve are crucial for all markets. A hawkish set of minutes is entirely possible if the tone of committee members continues to show a belief that any weakness seen in Q1 is ‘transitory’. I will be looking out for comments around the strong dollar and the tightening of monetary conditions that may have already resulted. We must also remember that this meeting took place before April’s poor payrolls. Certainly a big part of this USD rally seen in the past few days has been the belief that markets have got overly dovish ahead of these minutes. They are due at 2pm.

EURUSD is slightly lower on the session as markets continue to run into concerns around Greece. 1.10 is definitely in sight if the Fed signals that recent poor data has not changed course.

GBPUSD has broken back into the 1.55s after this morning’s BOE minutes. Tomorrow’s retail sales announcement will show whether real wage gains are being spent or saved by UK consumers.

USDCAD has been unable to benefit from a pick-up in oil prices and remains above the 1.22 mark. The Bank of Canada’s Governor Stephen Poloz said yesterday that Canadian GDP growth is basically flat and will rebound in Q2.

AUDUSD is flat on the session as traders wait on the Fed. I would not be surprised if this pair has seen some burnt fingers in recent days and traders are pausing, waiting for clues from Janet Yellen this afternoon.

Have a great day.