>> EUR: Greek economic conditions in question
Greek banks reopened after three weeks and have taken the first steps back to normality. After receiving a €7.2bn ($9bn) loan from the European Commission and immediately repaying the IMF and ECB, Greece reduced the pressure on its financial system and moves closer to operating regularly. However, this shifted market focus from default risks to sustainability. Market participants will now be looking for clues about the state of the Greek economy to determine if the loan will have any positive effect or if it’s just extending Greece’s lifeline for a few more months.
EURUSD moved higher on dovish FOMC minutes last Friday but returned to its average levels this Monday session. The main things to consider for EURUSD this week will be Markit PMI figures on Wednesday, and Germany export figures Friday.
>> USD: Dovish FOMCs, but busy week ahead
Last week’s dovish FOMC minutes weakened the US dollar against all main currencies. Market participants awaited positive signals from the Fed’s report that would hint a September rate hike, but the rather dovish language used by Yellen and other Fed members disappointed investors and deflated the dollar across the board. Additionally, last Friday’s Employment Cost Index, which tracks hourly wages and the cost of benefits provided, greatly undercut analyst estimates. This further weakened the USD as economic reports covering labor and wages have additional importance for the Fed’s future rate increases. Main things to consider for the dollar this week: Manufacturing PMI today, and Unemployment, Labor Participation, Nonfarm payrolls on Friday.
>> GBP: Pound focus on Bank of England meeting
The British pound had a very quiet week. The light UK economic calendar had only GDP figures being released, which came in line with expectations and did little to move trading levels. Sterling traded within the same rage all week, but the currency is expected to be more volatile this week. The Bank of England votes on interest rate hikes this Thursday and there are market noises that say we could see movements at the end of the year. This will be the main event for GBP this week.
>> AUD: Interest rate decision tomorrow
The Aussie dollar continues its weak performance against main currency pairs amid falling oil and commodity prices. The currency saw a small recovery after dovish FOMC reports last Friday, but AUD is back to its downward trend as oil dropped 2% and commodities pushes record lows last week. This first week of August has the Reserve Bank of Australia meeting about policy decisions on Tuesday. July saw policy held at 2.00% and is expect to have same results in this coming meeting. Monetary conditions have weakened as a result of the weaker AUD and while lower inflation and lower commodity prices may warrant a rate cut, higher house prices and fears of bubble should stay the RBA’s hand.