After sharp falls yesterday (as traders bought up the dollar following the tone of the Fed’s Wednesday evening press conference and on the back of some disappointing eurozone data) the euro found some support late in the day and overnight on the news that Greece had reached agreement with the EU and IMF on the details of an austerity plan that should bring it closer to securing its next round of funding. The deal includes deep spending cuts and more tax hikes but must still be passed by the Greek parliament next week. After falling as low as $1.4127, the USD/EUR rate recovered to reach highs of $1.428 before running into resistance around this level. Moves to the upside are likely to be limited near term. Following yesterday’s release of a disappointing set of eurozone flash PMI results for June, which suggested that activity in the region fell back sharply towards the end of Q2, markets will be paying close attention to this morning’s release of the key German Ifo survey.

Meanwhile, sterling traded below the $1.60 level versus the dollar yesterday for the first time in 3 months, weighed down by the general bounce in the USD as well as weak UK data. The CBI distributive trades survey showed retail sales at their weakest for a year in June, as the support from once off factors in earlier months falls away. Sterling also remains under pressure following Wednesday’s release of the minutes of the last Bank of England policy meeting, which were more dovish in tone than anticipated, suggested that further quantitative easing remains a policy option for the MPC. A modest bounce in the GBP/USD rate was seen overnight but downside risks remain. Versus the euro, sterling held its own for much of yesterday as the single currency also fell back versus the USD. However, the euro regained some ground overnight, pushing back towards Stg0.89p.