Above: A hollow victory? Despite Syriza's promise to dictate terms to the Eurozone a Greek exit looks almost inevitable.
As we enter the final week of February it is the pound sterling (GBP) that is dominating play on global currency markets.
The British pound has caught a bid against both the Euro and US dollar on Monday and buying interest remains alive on Tuesday.
The pound to dollar exchange rate is seen trading at 1.5448. The pound to euro exchange rate is at 1.3650.
The key GBP crosses are also benefiting with CAD, NZD, AUD and ZAR all feeling the impact of sterling demand.
There was no obvious catalyst for the GBP buying.
At present the pound sterling is the ‘go to’ currency thanks to the Bank of England’s stance on interest rates.
The BoE is likely to start raising rates in coming months while others are entering a rate cutting period.
And on days where the USD is being sold, the GBP really does tend to benefit.
US Dollar Rally Comes to a Screeching Halt
The US dollar kicked off the week in firm fashion, however buying interest came to a shuddering halt on news that US Existing home fell by 4.9% to a nine-month low.
Markets had been expecting a reading of 4.95 million annualized sales in January.
“It’s now been a month since the trade-weighted buck touched 11-year highs, a reflection of how mixed U.S. data have injected uncertainty into the outlook for higher U.S. interest rates. Markets will closely parse Ms. Yellen’s words this week in hopes of gleaning insight on when the central bank might boost interest rates,” says Joe Manimbo at Western Union.
Indeed, the outlook for the USD is firmly centred on the outcome of the upcoming Yellen testimony.
Any inkling that the first interest rate hike of the upcoming cycle will be delayed will most likely be met by a fresh barrage of USD selling pressure.
“Customers finding the current market better than their budgeted exchange rates should take cover with the greenback not far from recent peaks,” says Manimbo.
No Love for the Euro
Another day, another euro sell-off.
The selling pressure at the start of the new week comes despite a tentative deal being agreed between Greece and its European peers on February the 20th.
Peter Rosenstreich Chief FX Analyst at Swissquote Research tells us the prospect of a Greek exit from the Eurozone remains a distinct possibility:
“Greek critics are already referring to Syriza posturing in Europe as an “illusion.”
“We believe that in four months we will be faced with the exact same issues we are discussing today.
“The probability of a “Grexit” has increased significantly. The primary rationale is that when Greece comes back for cash with no cuts Europe will find this as being unacceptable.
“When combined with the fact that the strong arm efforts by Greece has not been lost on left wing parties in the rest of peripheral Europe.
“There have been reports that Spain’s Luis de Guindos took the hardest stance with Greek Finance Minister Yanis Varoufakis conjectured to damage the popular rise of Spanish government opposition Podemos (and Syriza ally).
“As pressure mounts to renegotiate reform programs, European policy makers will hit an exhaustion point.”