After negotiations with its European creditors Greece was given a final deadline to pass the new bailout laws in its parliament till the 15th of July or exit the Euro otherwise. The new austerity measures should be passed in the parliament for Greece to stay in the Eurozone. Finance ministers meeting in Brussels demanded Greece enact economic reforms to secure a bailout package of Euro 74 billion (USD 83 billion). Global markets would continue to remain volatile in the week ahead due to the looming uncertainty in the situation of Greece.
Euro appreciated by 0.43% against the USD last week with major gains coming on Friday after the Greek government on Thursday offered to make painful spending cuts and hike taxes in return for bailout funds, which has raised expectations of a potential deal between Greece and its creditors over the weekend.
Risk aversion was high last week on the back of Greece debt issues and fall in China’s equity markets. Global currencies saw high volatility on the back of risk aversion but recovered as Greece submitted fresh bailout proposals and Chinese authorities acted to stabilize equity markets. European leaders accepting Greece’s request for more emergency loans will determine currency market trends in the coming week. If proposals are accepted, the Euro will rally against the USD.
USD started the week on a high note due to rising risk aversion globally as Greece referendum held on last Sunday received an overwhelming NO vote to austerity measures. However the USD become volatile after the release of the of Fed June policy meeting minutes on Wednesday and on the release of U.S. economy data. Minutes released on Wednesday stated that policy makers will see more signs of a U.S. economy strengthening before raising interest rates and also raised concerns over Greece’s financial problems. USD Index (DXY), which tracks the movement of the USD against six currencies, posted a decline of 0.09% last week.
On Monday, Institute of Supply Management reported that that its non-manufacturing purchasing manager’s index rose to 56.0 in June against the expectation of 56.2, it was at 55.7 in the month of May.
On Tuesday, U.S. Bureau of Economic Analysis reported that the U.S. trade deficit rose to USD 41.87 billion in May from USD 40.7 billion in April and against the expectation of USD 42.6 billion.
U.S. Department of Labour on Thursday reported that number of individuals filing for initial jobless benefits in the week ended 4th July rose by 15,000 to 297,000 from the previous week’s total of 282,000 and against expectations of decline of 7,000 to 275,000.
Brazilian Real depreciated by 0.82% against the USD last week as Iron ore prices declined to the lowest level in at least six years. Brazil being the world’s biggest miner of the raw material is affected by fall in iron ore prices. Iron ore prices declined after heavy sell off in the Chinese equity markets, which has fuelled concerns over slowdown in the world’s second largest economy.
Russian Ruble depreciated by 0.08% against the USD as Brent crude oil prices declined by 1.9% on weekly basis from 60.32 USD/bbl to 59.18 USD/bbl. Russia’s main export is Crude Oil & Natural Gas, which helps the country generate half of its budget revenues. Bank of Russia is buying as much as USD 200 million daily to boost the nation’s reserves to USD 500 billion, it has purchased USD 7.4 billion since 13th May.
Asian currencies were down against the USD last week. Australian Dollar declined by 1.02%, South Korean Won declined by 0.58%, Philippines Peso declined by 0.10%, Chinese Yuan declined by 0.06%, Thai Baht declined by 0.47% whereas Japanese Yen appreciated by 0.01% and Indonesia Rupiah appreciated by 0.05%. Indian Rupee appreciated by 0.06% against USD and declined by 0.31% against Euro.