Daily Afternoon Report 07/07/2015
The dollar extended gains against a basket of other major currencies today after data showed that the U.S. trade deficit widened less than expected in May and as demand for the safe-haven greenback remained supported amid ongoing Greek debt worries.
The U.S. Bureau of Economic Analysis reported on Tuesday that the U.S. trade deficit rose to $41.87 billion in May from $40.7 billion in April, whose figure was revised from a previously reported deficit of $40.88 billion. The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.93% at 97.33, the highest level since June 2.
EUR/USD tumbled 1.19% to 1.0927 as Greek Prime Minister Alexis Tsipras was to present new proposals to eurozone finance ministers later in the day, ahead of a meeting of European officials to discuss the aftermath of Sunday’s referendum in Greece.
Greek banks were set to remain closed on Tuesday after capital controls were extended until Wednesday, amid concerns that lenders are close to running out of cash. Banks have been shuttered since last Monday, with ATM withdrawals limited to €60 per day. The European Central Bank announced Monday that it would keep its emergency liquidity assistance to Greece unchanged at levels announced last Monday. The ECB also said it will adjust the haircuts on collateral accepted by the Bank of Greece as part of the ELA, adding to pressure on Athens.
Elsewhere, the U.K. Office for National Statistics earlier reported that industrial production rose 0.4% in May, compared to expectations for a decline of 0.2%. But the manufacturing sector remained weak, with output falling 0.6% after a 0.4% drop in April. On a year-over-year basis, industrial production increased by 2.1%, the strongest annual growth since April of 2014, and manufacturing was up 1.0%.