Optimism that Greece will receive a new aid package and be able to avoid a debt restructuring has seen further euro gains, though media reports that the IMF will not make its next payment saw the euro under some pressure at the open today. Yesterday’s release of the flash May HICP also provided some euro support. While the annual inflation rate edged lower it remains well above the ECB’s target level reinforcing expectations for an interest rate hike, most likely in July. Greece is likely to continue to dominate euro trading with, on the economic front, today’s eurozone manufacturing PMI expected to match the earlier flash estimate.

Euro progress against the dollar, though, has been limited by technical resistance and whether these levels can be breached may depend on the extent of downward pressures on the US currency. Yesterday saw further disappointing US economic data with an unexpected fall in consumer confidence, a lower than anticipated Chicago PMI report and another fall in house prices. The dollar could come under further pressure, if economic data continue to point to a US sluggish economy with the ADP employment report and the manufacturing ISM under the spotlight today.

Having hit a one month high to dollar in early trading yesterday, sterling failed to hold these gains, pulled lower by some month end selling against the generally stronger euro. Concerns about the uneven UK economic recovery also weighed. These concerns may well be reinforced by today’s CIPS manufacturing PMI, which is expected to edge lower. Against this background some hawkish comments overnight from the BoE’s Sentance, which were in line with his previous stance, have had little impact.