Currency markets are quiet following Greece’s bailout

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As unbelievable as it is, it seems increasingly possible that there will be no agreement on the budget in time to prevent the United States going into default at the beginning of next month. Vince Cable, Britain's Business secretary, summarised the situation when he said "the biggest threat to the world financial system comes from the American Congress rather than the Eurozone."

What Mr Cable failed to point out was that no one seems to have a clue about the deal to rescue Greece and the Euro however, the markets are clear about what is going on (or not) in Washington.

After the euphoria of last week, the reality begins to kick in as far as the Eurozone is concerned with Moody's downgrading Greece's sovereign debt rating on Friday. The news is no surprise to the markets as the economic and fiscal mess that the Greek economy is in remains to be cleaned up and there are still a lot of problems to solve. Perhaps that is why the markets where so quiet on Friday?

Investors seem uncertain about the post-summit Euro but aren't sure what to be uncertain about. The lack of clarity on where funds are going to come from for Greece the Euro has done nothing at all against the US Dollar, Sterling and the Japanese Yen. Surely if the sovereign debt issues re-emerge, the Euro will come under sustained pressure.

The only real mover was Canadian Dollar which took a hit on Friday when Canadian consumer price index showed the headline rate of inflation fell from 3.7% to 3.1%. The figures were much lower than expected, reducing the likelihood of an imminent rate increase and helped Sterling gain over a cent against the Canadian Dollar.

It will be a quiet day on the data front today with UK mortgage approvals in June and the Dallas Fed's manufacturing index. Tonight New Zealand releases the balance of trade for June and the Conference Board publishes its Australian leading indicator for May.