(MENAFN- Arab Times) Developments in the Greek debt crisis continued to take center stage last week. The heightened uncertainty has triggered risk aversion in the market early in the week, supporting traditional safe haven currencies such as the Swiss franc and the Japanese Yen.
The Greek Prime minister Alexis Tsipras called for a referendum to take place on Sunday July 5 to decide whether to accept the demands proposed by the country's international creditors. That drove the ECB to freeze the Emergency Liquidity Assistance to Greek banks, prompting Greece to close its banks for the time being and impose credit controls that limited cash withdrawals to ‚¬60 on a daily basis in an effort to prevent a possible collapse of its banking system as depositors rush to withdraw their money.
Adding to the uncertainty, Euro-zone finance ministers have since refused the Greek government's request to extend the bailout until after the referendum. As a result, the Greek people will likely vote for or against a bailout offer which has already expired. Indirectly, the referendum will also be viewed as the Greek public voting for or against the current Greek government and Greece's ongoing membership of the Euro-zone. Moreover, tensions continued to rise as the IMF confirmed that Greece has failed to make the ‚¬1.6bn payment due to the IMF. A confirmation email from the IMF confirmed that Greece is now in arrears, making Greece the first developed country to miss a payment to the IMF.
On the foreign exchange side, the US Dollar remained broadly higher against its major counterparts as concerns over Greece dampened risk sentiments, boosting demand for the safety of the greenback. The US dollar index opened the week at 96.19. The index then dropped to 94.85, as investors feared that the developments in Greece would push the Fed to consider postponing any interest rate hikes. The currency then regained its losses as investors went back to the greenback as the situation in Greece intensifies. The Dollar lost some of its momentum as data from the labor market showed that that the US economy added fewer jobs than expected last month, dampening expectations for a rate hike. The index closed the week at 96.11
The Euro traded in a volatile manner last week due to the heightened tensions between Greece and its creditors. The Euro opened the week at 1.0953 a 200-point drop from its previous close. The currency then regained its losses and reached a high of 1.1278 as the market treated the developments in Greece to have a negative effect on global growth, prompting investors to fear that the developments in Greece might prompt the Fed to postpone any rate hikes. The concerns pushed interest rate differentials in favor of the Euro against the US Dollar. The strength in the Euro was short lived as it dropped back to the 1.10 levels as negative news from Greece continued to fuel the risk-off trade. The Euro spiked higher towards the end of the week on a letter from the Greek PM Tsipras to creditors containing further concessions, but the currency reversed quickly as it was rejected with the Eurogroup ruling out further talks until after the 5th July referendum. Meanwhile, Tsipras continued to urge a no vote on Sunday, which fuelled confusion in the markets. The Euro closed the week at 1.1114.
Sterling started the week with a strong footing against the US Dollar to reach a high of 1.5787. However, a series mixed economic data combined with concerns over Greece pushed the currency to reach a low of 1.5560 mid-week. The currency traded in a tight range close to its low before edging slightly higher amid data that showed that the UK service sector expanded at a faster rate than expected in June. The pound closed the week at 1.5570. The Japanese Yen gained dramatically at the beginning of the week as the market sought refuge amid the news from Greece. The Japanese Yen opened the week at 122.53. The Yen then appreciated against the US Dollar pushing the currency pair to a low of 121.92 as Greece missed its IMF loan payment. Meanwhile, the currency gradually lost its gains towards the end of the week due to positive data from the US, pushing USDJPY to a high of 123.72. Positive data from Japan combined with disappointing data from the labor market helped the Yen recoup some of its losses at the end of the week.
Similarly, the Swiss franc strengthened at the beginning of the week as fears over the escalating crisis in Greece pushed investors to safety. Meanwhile, the currency's strength was limited as the Swiss National Bank said it intervened in markets to weaken the franc. The franc opened the week at 0.9389 and gained dramatically to reach 0.9241. The Swiss franc reversed its gains and dropped against the US dollar due to the SNB intervention. Additionally, positive data from the US pushed the dollar higher against the Swiss currency. The USD/CHF dropped after reaching a high of 0.9506 as a disappointing Nonfarm payroll result pushed the pair to close at 0.9403. US consumer confidence increased solidly in June, with households upbeat about the labor market, supported views that the economy was back on a firmer footing after faltering at the start of the year. The Conference Board's index of consumer confidence increased to 101.4 in June from 94.6 a month earlier, exceeding market expectations of a 97.1 reading.
Pending home sales in the US rose to the highest level since 2006 in May, underlining optimism over the health of the housing sector and supporting the case for a US interest rate hike this year. In a report, the National Association of Realtors said its pending home sales index increased by a seasonally adjusted 0.9% last month, compared to expectations for a gain of 1.2%.
The June ISM manufacturing data came at a five-month high reinforcing the strength of the US economy and solidified the case for rate rises later this year. The figure combined with recent positive data from the manufacturing sector confirms the view that the economy is gathering momentum after contracting at the start of the year.
The US economy added fewer jobs than expected last month data released on Thursday showed, tempering expectations for higher interest rates. The Labor Department reported that the economy added 223,000 jobs in June, compared to expectations for jobs growth of 230,000. May's figure was revised down to 254,000 from 262,000 previously. Additionally, the jobless rate fell to a seven-year low of 5.3% as more people left the labor force. Economists had expected the jobless rate to decline to 5.4%. The data still indicates ongoing improvements in the labor market.
Meanwhile, average hourly earnings in the US fell more-than-expected last month. In a report, US Bureau of Labor Statistics, Department of Labor said that average hourly earnings in the US fell to a seasonally adjusted 0.0%, from 0.2% in the previous month whose figure was revised down from 0.3%.
Additionally, the number of people who filed for unemployment assistance in the US last week rose more than expected, but remained in territory consistent with a strengthening labor market. The Department of Labor said the number of individuals filing for initial jobless benefits in the week ending June 26 increased by 10,000 to 281,000 from 271,000 in the previous week.
UK
British manufacturing growth slowed unexpectedly to its weakest rate in more than two years in June, dented by subdued export demand from Europe in the face of a strong pound. The Markit/CIPS manufacturing purchasing managers' index (PMI) fell to 51.4, the weakest reading since April 2013, from a downwardly revised 51.9 in May. June's PMI was worse than expectations of a slight improvement to 52.5. Meanwhile the figure still indicates growth as it held above the 50 mark. Construction activity in the UK grew at its fastest rate in four months in June. The monthly Markit/CIPS Purchasing Managers' Index (PMI) rose to 58.1 in June from 55.9 in May, its biggest increase in a year and exceeding market expectations.
Britain's services sector grew more than expected last month, suggesting that the economic recovery picked up going into the second half of the year. The Markit/CIPS UK Services Purchasing Managers' Index (PMI) rose by 2 points in June to 58.5, exceeding expectations and staying comfortably above the 50 mark that divides growth and contraction.
Asia
Activity in China's manufacturing sector expanded slightly in June though not as much as expected offering some signs that the world's second-largest economy may be starting to level out after a range of support measures. The official Purchasing Managers' Index (PMI) stood at 50.2 in June, unchanged from the previous month's reading. Analysts had predicted it would edge up to 50.3, but growth remained tepid, with the reading just above the 50 point level that separates contraction from expansion on a monthly basis.
Kuwait
The USDKWD opened at 0.30230 on Sunday morning.
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