This morning’s UK consumer price index is expected to show that price pressures slowed from 0.1% to 0.0% last month. If the data prints inline with economists’ forecasts then we could see Sterling tumble against some of the majors as Bank of England rate hike projections are adjusted. However, the impact of the timid CPI score could be reduced because tomorrow’s UK labour market report is projected to show robust growth in average wages.

The unemployment rate is likely to remain at a seven-year low of 5.5% but weekly earnings are expected to touch their highest peak since the first half of 2010, which could help drive Sterling higher.

Euro

GBP/EUR rose by around 150 pips yesterday.

Despite obtaining a democratic mandate to bargain for a new aid deal that would not feature harsh cuts to public services and steep tax hikes, Greek PM Alexis Tsipras was forced to accept a draconian austerity package yesterday. As the Syriza leader’s efforts to achieve debt restructuring were shot down reporters commented that Tsipras’ demeanour resembled that of a ‘beaten dog’. And like an abused animal he gave in to his masters’ requests and accepted a new list of recessionary economic reforms that was described by the Financial Times as ‘the most intrusive economic supervision programme ever mounted in the EU’.

So, Tsipras failed to put Greece on a path to sustainability but he succeeded in keeping the Hellenic Republic in the Eurozone, which was generally seen as a positive step for Europe in the short term. However, those looking further ahead have commented that the damage likely to be inflicted on the fragile Greek economy by the latest measures could easily lead to flare-ups further down the line That’s if Tsipras manages to gain enough support from opposition parties to even push the latest set of tax hikes, privitisations and spending cuts through parliament on Wednesday.

A Greek aid deal was supposed to remove the spectre of a ‘Grexit’ from financial markets but the reaction from currency traders – to send the Euro lower by around 150 pips against the Pound – suggests that analysts are concerned that the latest piece of economic strangulation could kill off the Hellenic Republic later down the line.

US Dollar

The Pound rose by around 70 pips to surpass a technical resistance level against the US Dollar yesterday morning as news of the potential Greek bailout deal started to assuage fears that the crisis in Europe could negatively impact Britain’s struggling export sector. However, as the day went on markets showed little optimism towards the proposed austerity measures and financial aid package, which many believe will not put Greece back on the path to fiscal sustainability.

The US monthly budget statement came in slightly stronger-than-anticipated at $51.8 billion compared to estimates of $50.5 billion and this contributed to a rebound in demand for the ‘Greenback’ during the evening. However, US retail sales are predicted to slow from 1.2% to 0.3% this afternoon and that could put a little bit of pressure on the ‘Buck’.

Canadian Dollar

Sterling struck a fresh six-year high against the Canadian Dollar yesterday as the nation’s biggest export, crude oil, fell in value again. The risk-sensitive ‘Loonie’ was also hurt by the news out of Greece, which some traders felt had removed one of the obstacles standing in the way of the Federal Reserve raising interest rates. However, the US central bank may still wait until December to start tightening monetary policy.

Australian Dollar

The Pound to Australian Dollar exchange rate peaked at another six-year high yesterday as investors continued to pressurise the Antipodean currency as a means to hedge against a sharp slowdown in China. The recent tumble in Chinese stocks has led to a 60% rise in bets that the Australian Dollar will fall. This is because the Australian economy relies heavily on Chinese investment and if China slows, so too will Australia.

New Zealand Dollar

The Pound rallied and then settled down back where it started against the New Zealand Dollar yesterday as traders mulled over the potential consequences of the latest Greek debt negotiations. If the bailout package is approved by parliaments across Europe – including Greece itself – then we could see a period of relative calm in financial markets. This could help boost UK exports to the Eurozone and also pave the way for an interest rate hike from the Federal Reserve – two things that could boost the Pound and hurt the ‘Kiwi’ Dollar.

But on the other side of the coin, a positive outcome from the Greek deal could bolster general risk sentiment and therefore increase demand for the risk-sensitive New Zealand Dollar. Subsequently traders remained tentative and no large moves were seen in GBP/NZD.