A quiet start to the trading week with the pound making small gains against the majority of the 16 most actively traded currencies ahead of a crucial vote in the Greek parliament as the euro zone sovereign debt crisis rumbles on.
The Greek government is due to face a vote of confidence, a crucial first step towards gaining a vital €12 billion loan. If the government survives the vote, Greece’s parliament will be asked to back the latest spending cuts, worth €28 billion on 28 June. These austerity measures and other reforms have to be introduced before the European Union and International Monetary Fund release the funds.
Greece needs the loan to pay its debts. Olli Rehn, the European Union’s Monetary Affairs Commissioner, urged Greece to continue with its austerity measures.
“The greatest weight of responsibility lies on the shoulders of the new Greek government,” he said.
The euro came under pressure early on Monday after a weekend meeting between euro zone finance ministers’ meeting in Luxembourg failed to reach an agreement on Greece’s financial aid package. Officials dealt a blow to market sentiment on Monday after it was decided instead that they would hold off on agreeing on the next round of emergency loans to Greece.
The euro recovered in the afternoon after upbeat comments from Eurogroup chairman Jean-Claude Juncker. The euro zone policy maker soothed jitters about stability in the region with his assurances that everything will be done to restore the debt situation in Europe.
The pound had a better time of it against the US dollar as risk appetite picked up. Ongoing uncertainty about Greece’s debt crisis took the pound higher against the euro.
In the little economic data out yesterday, property website Rightmove expects average house prices to edge up slightly in 2011 as a booming London market cements the north/south divide. Rightmove says that gains of 8.1% in the first half are expected to ebb away in the remainder of the year in line with the seasonal trend seen last year.
This morning sees the publication of the latest Public Sector Borrowing Requirement data for the UK. Any rise in the figure would be seen as yet another further sign of the weakness in the UK economic recovery and may put the pound back under the cosh.
Commentary by Tony Redondo
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