EUR: EA heads of state summit and PMIs the focus

The EUR will remain vulnerable to news regarding Greece's ongoing negotiations with its creditors. In the wake of no progress made at last Thursday's Eurogroup meeting, euro area heads of state will meet on Monday (from 6pm London time) in what could be a last-ditch attempt to strike a deal to avert a financial crisis for Greece. 

While differences remain at the technical level and the end-of-June IMF deadline is approaching, euro area leaders will likely try to strike a deal with Prime Minister Tsipras, at a minimum regarding a programme extension. Failure to do so would allow the ECB to start increasing haircuts on ELA collateral as soon as next week and likely result in an immediate negative market reaction and a worsening crisis scenario. Depending on the outcome of the euro area summit, there is also the potential for discussion to continue into Thursday's scheduled EU summit.

Wednesday's German IFO business climate index is likely to moderate slightly in June to 108.0 from 108.5 (consensus: 108.1) but remain well above recent lows of 103.6 in October last year.

"In terms of data , we look for euro area flash composite PMIs to edge down in June to 53.4 (consensus: 53.5), due to lower services confidence (Barclays: 53.4; consensus: 53.6), while manufacturing PMI should inch up to 52.4 (consensus: 52.2)",says Barclays.