A tougher week for sterling saw it struggle against the US dollar and stutter against the euro, although it is still very close to eight year highs against the euro.

Monday was a UK bank holiday and the flow of UK economic data since then has been limited. On Thursday we had the second estimate of economic growth for the first quarter of 2015 which was 0.3%, slightly below the expected 0.4%.

Greater influences on sterling have come from elsewhere. The Greeks are convinced they are close to a deal with their lenders which has boosted the euro during the week. Their lenders, from the rhetoric, seem not to be so convinced. Still lots of uncertainty in this Greek saga. In the US, economic data has taken an upturn which has boosted the US dollar as talk of increasing US interest rates has restarted.

The euro gave up early gains against the US dollar but gained ground against sterling on Thursday.

The single currency slipped back towards one-month lows against the US dollar as hopes that Greece is closer to a deal with its lenders began to fade for now. The euro had a boost on Wednesday as the Greek government claimed it had started an initial agreement with its international creditors – giving investors confidence that the process to unlock more financial aid had begun. However, the European Central Bank warned yesterday that default risk expectations have ‘increased sharply in Greece’, increasing the tension around the situation.

Today there is retail sales data out in the morning, forecast to increase back up to 0.8%. Last month’s figure was -2.3%, so any deviations from expectations could cause movement in euro markets.

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We have seen continued strength for the US dollar this week as talk emerged of recent US economic data being supportive of the view that this year’s first quarter economic performance has been similar to last year’s poor showing. This was down to other factors such as the weather. Due to this, whispers are resurfacing regarding the timing of a US interest rate rise.

On a positive note for the US economy, core durable goods came out as expected for the first time in 9 months, with consumer confidence also showing slight growth. However, the weekly unemployment claims showed weaker than expected figures, but as this was a weekly figure this did not have too much of an impact of the US dollar. Multiple US Federal Reserve members also spoke during the week, with a June interest rate rise still being mooted as an option.

Today the focus will be on the preliminary growth data with expectation surrounding a figure in the negative. This would mirror the first-quarter data releases showing that the US economy was struggling, which seems to be a regular seasonal occurrence.

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It’s been a torrid week for the Australian dollar as it continually weakened against sterling to reach levels last seen in August 2009. A catalogue of poor data this week, including weakening private capital expenditure data yesterday, have all played a part in the poor performance of the Australian currency.
It hasn’t been much better for their cousins across the sea. The start of the week saw some positive trade balance data for the New Zealand dollar but it had no real impact on the currency’s performance against sterling. And although it is only currently at a one-week high, it’s at a level we not seen in four years.

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The Queens Speech at the opening to Parliament seemed to bring little joy for sterling as it had a difficult afternoon and struggled across the board. Today we have the release of the EU referendum bill by the government.

A positive start to the day saw sterling push to a two-month high against the euro, with markets considering the likelihood of bad news regarding the Greek debt situation. However, following the announcement by a Greek government official that the nation were to begin drafting a funding agreement with its creditors, sterling found itself under pressure. After strengthening against the euro for 3 days straight, sterling fell sharply following the release of this news as hope grew of a solution to the long standing issue. The UK currency also struggled against its other major trade partners as demand for sterling as a haven currency lessened in the wake of this news.

Sterling extended its losing run against the US dollar, as speculation mounted that we could see a number of Federal Reserve members push for a rate hike in June.

Limited data releases in the UK today and tomorrow we have the release of the second estimate of UK economic growth throughout the second quarter. With little other economic news released from the UK this week, investors will be eagerly awaiting this data. Eyes will also be on the ongoing G7 meetings, where we will expect to hear more revelations.

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After a bad start to the day, the single currency rebounded against almost all of its major peers on Wednesday following reports that the Greek government and its creditors have started drafting a “staff-level” agreement. This boosted hopes that a final agreement on a ‘cash for reforms’ deal is growing closer. In fact, the government expressed confidence that it would make the €305m payment to the International Monetary Fund (IMF) due on 5th June, and bond markets sighed momentarily as 10-year Greek bond yields declined from 11.89% to 11.53%.

While this may provide investors a level of comfort in the short term, no long-term arrangement about the indebted nation has been reached. Several much larger payments still loom heavy on the horizon, including a further €1.3bn to the IMF in June. Are these agreements only delaying the inevitable.

Today we have the release of a raft of May sentiment indexes for the Eurozone for business climate, consumers, economic and industrial. Expectations are for them to be holding steady.

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It was a very quiet day on Wednesday for the US dollar, with no data releases to prod it. There was slight continued strength for the US currency, mainly due to hawkish comments from a US Federal Reserve member regarding a possible interest rate rise in June. Recent US economic data has been supportive of the view that this year’s first quarter economic performance was similar to last year and down to other factors, such as the weather and an extended port strike, and not due to systemic weakness in the US economy, hence the re-emergence of talk concerning the timing of US interest rate increases.

The G7 meeting continues today, we will also see some data releases in the form of weekly unemployment claims, which is expected to fall slightly, as well as pending home sales data. The recent strength seen by the US dollar has also been contributed by the euro’s performance, and continued euro weakness will help to boost the dollar against the Eurozone currency.

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• Growth data came out worryingly low in Russia at -4.3% yesterday, well below expectations. This further decrease in Russian growth demonstrates its weakening economy, which resulted in a sterling appreciation of 1.5% against the rouble. Russian growth has now been negative for four consecutive months and investors are anxious to see if the current trend can be brought to an end.
• The Swedish krone had a poor start to the day yesterday, finding itself depreciating against all major competitors. However, Sweden released positive data in the form of business confidence, consumer confidence and balance of trade figures, which saw the currency strengthen at around mid-day.

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