Greek government officials met with counterparties across Europe this week to begin negotiations over the country’s bailout programme. The response received after each meeting varied, which helped keep volatility high in currency markets. The view from French Finance Minister Michael Sapin was that he was open to lightening the Greek debt burden and that Greece had no future outside the euro. That position seemed to differ from the response seen in the UK and by the European Central Bank. The UK Finance Minister said that the Greek stand-off was currently the biggest risk to global financial markets, while the ECB removed its waiver to accept Greek debt as collateral for funding Greek banks. The meetings and their outcomes seemed to dictate market sentiment and therefore direction. Economic data became a side story, while some attention was drawn to the Chinese central bank cutting its reserve requirement ratios and a fall in energy prices. Oil inventories in the US rose by twice the expected amount to record levels, reversing a price rally seen earlier in the week.

Euro

Economic data released this week was ignored but perhaps needs to be reconsidered as markets continue to digest what took place with Greek debt negotiations. The PMI services survey was revised higher, indicating a quicker pace of growth in the sector. Eurozone retail trade jumped beyond expectations and German industrial orders rose to levels not seen in six-and-a-half years. The economic data supports the view that the eurozone continues to see a slow recovery, but the euro continued to hold near 11-year lows against the US dollar and seven-year lows against sterling as political stability continued to be called into question.

Sterling

Sterling reversed earlier losses and was able to maintain seven-year highs against the euro as economic data continued to support the view that the UK economy was growing. CIPS PMI service sector survey bounced off 18-month lows instead of seeing the pace of growth decline as expected. The PMI manufacturing survey also showed the pace of growth expanding. The data preceded the Bank of England’s policy meeting. The central bank left its monetary policy unchanged as expected.

US dollar

The focus for this week in the US was always going to focus on the end-of-week jobs report. Weekly jobless claims have been negatively skewed because of seasonal effects and while many will want to see a strong jobs number, a weak release could easily be shrugged off, particularly since the ADP employment report remained above 200,000. Close attention will be paid to the average hourly earnings data. Weak wage growth continues to be a concern for policymakers. The FOMC met last week and decided to remain ‘patient’ in its policy towards higher interest rates in a large part because of weak wage growth. A pick-up in wages could bring forward rate increases and help lift the US dollar.