IMF gets heavy

Final final warning
Six years after it effectively disappeared from circulation the Zimbabwe dollar is at last being demonetised, leaving the country with no currency of its own. From Monday anyone with savings can turn them into US dollars at a rate of Z$35,000,000,000,000,000 to US$1. Greek officials will observe the process.

Less than a fortnight after the EU/ECB/IMF troika presented Greece with a final offer regarding its bailout funding it has issued it with another final warning. Donald Tusk, one of the EU's presidents, put it quite bluntly: "There is no more time for gambling. The day is coming, I'm afraid, that someone says that the game is over." As if to emphasise the point, the IMF walked out of the negotiations because Greece refused to bend on "maximalist IMF proposals" to which it could not agree.

European equity prices were marked down on the news but there was little reaction by the euro. Although it was down by a cent on the day against sterling and lost three quarters of a US cent the euro took less of a beating than the Norwegian krone, which suffered as the result of lower oil prices. Investors might be concerned about Greece but they still seem to think a last minute deal will be done.

Retail sales fail to lift dollar
US retail sales went up by a monthly 1.2% in May, a stronger outcome than the 1.1% increase forecast by analysts. Sales excluding cars were also better than expected, rising by 1.0%. But investors did not see the numbers as a reason to buy the dollar.

The word on the street was that there is concern that the rate-setters at the Federal Reserve see the strength of the dollar as a reason to hold back from taking interest rates higher. That might sound a flimsy argument for ignoring the better-than-expected retail sales data but no better one presents itself.

There were no other important data to guide exchange rates. Sterling strengthened on most fronts, rising by an average of 0.3% - half a Japanese yen - against the other dozen most actively-traded currencies. It was roughly steady against the US dollar and went up by a third of a Canadian cent, two thirds of a NZ cent and one Australian cent.

Poets day
If the FX market could see no reason to react to yesterday's IMF ultimatum to Greece or the US retail sales data it is unlikely to find any inspiration among today's ecostats. Many participants will be looking to pull down the shutters at half past three.

The European data this morning cover Spanish inflation and Euroland industrial production. After lunch US producer prices are followed by the provisional University of Michigan index of consumer sentiment. Of those, only the Michigan confidence index has any real potential to get things moving.

With little else to occupy them, investors and the media will spend the day speculating pointlessly about Greece. Have good weekend.