With Greece due to repay €300 million to the IMF on Friday, both the euro and the Greece crisis are firmly at the forefront of attention right now.
Signs of progress in bailout talks between Greece and its creditors couldn't have arrived in a more timely fashion, therefore, and reports that a draft agreement was close to completion have helped the euro to surge. Reuters cited an anonymous source saying that Greece's lenders will soon submit a draft agreement to Greek prime minister Alexis Tspiras, who earlier announced his own proposal for his country's creditors. Whether the impasse in the debt talks that have dragged on for months can finally be broken remains to be seen, but the euro soared in the forex market early on Tuesday. EUR/USD rose 1.8% to 1.1220, while EUR/GBP jumped 1.2% to 0.7277.
The euro was also boosted by positive movement in eurozone inflation. The flash reading of the Harmonized Index of Consumer Prices (HCIP) for May showed an annual increase of 0.3%, higher than the 0.2% that had been expected, and matched the highest rate seen since last October. Furthermore, the rate was 0.9% higher when excluding the more volatile components of food, energy, alcohol and tobacco. The headline rate has increased for four consecutive months now, which is a solid trend, though there remains a long way to go to attain the ECB's 2% target.
The Australian dollar is another currency enjoying a sharp upturn in strength today, climbing 1.2% against the US dollar and just over 1% against the British pound following the Reserve Bank of Australia's decision to maintain its benchmark interest rate at 2%. Though the central bank's move was widely anticipated, the lack of any clear intention to cut rates in the near future in Governor Glenn Stevens' statement may have played a part in the currency's gains. Australian GDP data is released on Tuesday evening.
US shares opened weaker on Tuesday, the Dow Jones quickly sliding more than 100 points after the opening to sink below the 18,000 mark. The broader gauge of the S&P 500 Index also fell substantially, dropping 0.54% to 2100.3.
It is set to be a fairly quiet day for US economic news, with April's factory orders and May's auto sales the main items of note. The highlight of the week's economic calendar will be on Friday, with the release of official Government employment data for May. Payroll growth bounced back above 200,000 in April and expectations are for a similar result in May: the consensus estimate points to growth of 220,000, while the unemployment rate is expected to hold firm at 5.4%. Investors will be looking for an early steer on the number with Wednesday's pre-market release of ADP's private payrolls report for May.