The euro is trading on a firm note as markets are somewhat more optimistic that several outstanding issues on Greece are close to resolution. Firstly, late into the session on Tuesday a Greek government spokesperson finally announced that political leaders would meet on Wednesday to respond to the bailout proposals by noon. It appears that a tentative deal has been secured with the troika, though some individual points on how the cuts are going to be achieved remain outstanding. Continue reading →

The euro suffered overnight as fears over the situation in Greece have resurfaced. While the market is hoping for a clinching of a debt swap deal today with private sector creditors, securing cross-party support for further austerity measures and securing further funding from the troika is proving far more difficult. According to political leaders in Athens, the main parties have until noon today (local time) to respond to the troika’s demands, and so far there appears some distance between where the national unity government lies and the IMF’s targets. Talks continued late into the evening on Sunday and will resume today between the troika and the local authorities. Continue reading →

Radio silence out of Europe has kept investors in wait-and-see mode for yet another overnight session. However, interest in USDJPY is intensifying given the pair is hovering above key levels and US payrolls is just hours away. As far as economic data goes, the yen shows greatest sensitivity to the US employment situation, and a weak report later would likely give the yen another push higher. Continue reading →

Risk assets consolidated yesterday’s gains overnight. The dollar failed to regain lost ground and Asian equities followed the S&P 500 higher. Respectable global manufacturing prints certainly helped, but the gradual easing of sovereign stresses in Spain and Italy probably played the greater role. We keep our cautious stance however, noting that European austerity measures are mostly only in their early stages of implementation, so there is scope for further deterioration in economic data as the process of fiscal consolidation begins to bite in earnest. At present, growth forecasts remain relatively conservative, and there is still some upside risk to our expectations of a recession in Europe in particular. Continue reading →

The price action overnight was largely driven by a better-than-expected China PMI which gave AUD a modest but temporary boost. The euro meanwhile remained under downward pressure as investors digested yesterday’s news reports suggesting Greece is resisting further austerity measures to bring debt down to sustainable levels, and that negotiations on this front are likely to make slow progress. Continue reading →

Risk appetite was boosted overnight by an article in the Financial Times claiming that the ECB’s next 3y LTRO (due on Feb 29) could see demand for up to EUR1 trn in cash, double the previous amount. If so, it would go a long way towards alleviating term funding concerns for Eurozone banks as their bonds fall due throughout the year. Continue reading →

The USDJPY rally that began three days ago reversed completely overnight. Falling US Treasury yields in the aftermath of the dovish FOMC meeting were to blame. USDJPY had been following gradually ever since, and fresh long positions put on just ahead of the meeting finally had their stops triggered overnight. Continue reading →

The FOMC surprised markets by pledging to leave rates on hold until late 2014 and committing to an explicit inflation target. The Fed will target the y/y change of core personal consumption expenditure (PCE) at 2%, moving away from the previous informal target range of around 1.7% to 2%. The Fed also said it was not appropriate to adopt a fixed goal for employment because “the level of unemployment that can be achieved without sparking inflation is not largely determined by monetary factors”. Continue reading →

USDJPY continued to march higher during the Asia session despite domestic Japanese exporters selling into the rally. The move got underway during the US session yesterday, likely in anticipation of a significantly less-dovish Fed. Data confirming that Japan’s trade balance slipped into deficit territory for 2011 for the first time since 1980 also probably supported the pair at the margin. Continue reading →

The euro settled above 1.30 during the US session as investors remain hopeful of a settlement on the Greek PSI. However, reports remain conflicting – a finance ministry source noted that there will be a final offer on the bond swap by February 13th, and the Eurogroup said that current talks on the debt deal were ‘constructive’, but other sources warned that there is currently no intention by either the Eurozone or the IMF to give more money to Greece. Continue reading →

The euro continued its rebound on Thursday, trading in a 1.2839-1.2972 range against the dollar, on the back of strong auction results and hopes of a satisfactory conclusion to PSI talks in Greece. Spanish and French auctions were taken favorably by the markets and the euro pushed higher in the European session. Continue reading →