Simon Smith

Ray of (volatility) Light

With the dust having cleared from the Swiss franc move, the Greece situation having been resolved (at least for now) and twenty central banks having now eased policy so far this year, FX volatility has been falling in the past week, like a caped fallen Madonna from a Brits Award stage. The CB CVIX index (similar basis to equities VIX) is now back at levels prevailing around the middle of December last year. Still, there is a ray of light for some currencies. Sterling has been pushing ahead over ...

Simon Smith

Being patient for volatility

In the wake of Fed Chair Yellen's testimony yesterday, the algo and machine readable news programs will be set to buy the dollar when the word "patient" is removed from the Fed statement. Yellen stated that the removal of this word, which replaced the phrase "considerable time" for keeping the current rate that existed up to the December Fed meeting. In sum, the impact was to weaken the dollar, push stocks higher and delay future dollar volatility and gains. Stocks were also modestly firmer as ...

Simon Smith

It’s all about the rate

Today’s focus will be with Fed Chair Yellen’s testimony to the Senate Banking Committee in Washington. This happens every six months and is a key element of the Fed’s accountability to the US Administration. The dollar will be looking closely for further clarification of when the Fed may start tightening rates, having moved their forward guidance language from referencing “considerable period” to them being “patient”. But the Fed has struggled with such guidance and Yellen in particular, namely ...

Simon Smith

Not quite over for Greece

The deal on Greece put together during the latter stages of Friday gave the single currency a lift into the weekend; EURUSD moving up above the 1.14 level. That has struggled to be sustained though, as there are still doubts regarding the measures that Greece will commit to in order to secure the funding. They are due to put these to the Eurogroup today and if they are not accepted, then another meeting of finance ministers will take place tomorrow. On the face of it, Greece appears to have ...

Angus Campbell

Greece remains biggest determinant to EURUSD movement

The market continues to behave as if a resolution to the Greek issue is imminent and it would seem that investors remain confident that a Grexit is not going to happen. Despite the lack of an agreement to the extension of the existing bailout, EURUSD has held up relatively firmly and other risk assets such as equity indices remain near their all time highs. For the Eurozone as a whole, the economic outlook doesn’t look all that bad with business, confidence and manufacturing surveys remaining ...

Angus Campbell

Kicking the Grexit can

The ECB has come to the rescue of Greek banks once again by increasing the cap on ELA from €65b to just over €68b. This does not resolve the problem of deposits being depleted as people continue to withdrawal funds from Greek banks and of course the wider issue of a new deal being negotiated to prevent a Grexit. Today it is expected that a six month extension to the existing bailout will be accepted today in order to give more time to negotiate a more permanent deal later in the year. It’s a ...

Angus Campbell

Recent sterling strength to be tested

Currency markets have been placid so far this week, in particular the euro which has been taking the negotiations between Greece and Germany in its stride. It’s been a far cry from a couple of years ago when volatility was much higher during the debt right down agreements, but the risks remain the same of a possible Grexit. Perhaps investors are getting a little complacent as today will not only see negotiations continue, but the ECB is due to make a key decision about Greece’s access to ...

Simon Smith

Living in continued hope

The drop in the euro after the collapse of the Greece talks (initially one big figure) looked out-sized given the fact that no-one really expected it to be any different. This had much more to do with illiquid markets in the face of the Presidents' Day holiday in the US. Still, it seems that an agreement was close at one point, only to be snatched away from the table. Both sides appear to agree on some sort of extension of the current program. The eurozone wants this to happen in its current ...

Simon Smith

The next Greek showdown

Not for the first time and probably not the last, today is once again the day of reckoning for Greece and the Eurozone. The story is all too familiar and the suggestions in the press are that the chances of a deal being struck look to be fairly slim. That’s all well and good, but time is naturally running out for a tidy resolution on either side. There remains only a marginal spill-over into other peripheral markets and the single currency remains relatively sanguine about it all. That is ...

Angus Campbell

Markets defy convention

The recent moves in FX markets have caught many people off guard. Perhaps not to the extent of the SNB floor removal a month ago, but the dollar strength of last year and the first part of January has come to a grinding halt. Despite the Bank of England at their quarterly Inflation Report saying that there is room to ease monetary policy further, GBPUSD rallied as growth forecasts for next year were readjusted higher. The market had become too bearish of sterling considering the growth ...

Simon Smith

Euro bets on Greece crumbling first

It was no surprise at all that there wasn’t an agreement for Greece from yesterday's meeting of finance ministers. Neither side can even agree on what is up for negotiation. Germany had taken the calculated risk that Greece has more to lose than they have, so have chosen to hold tight. For their part, they know that giving Greece the negotiating room beyond the Troika will open up the doors to further anti-austerity movements in the eurozone and they fear they will be the ones paying the price. ...

Simon Smith

A huge moutain to climb

The Eurozone finance ministers meeting today to discuss Greece looks unlikely to result in a deal, so the best markets can hope for is some sign of progress because so far there have not been any of real substance. There were some rumours yesterday that there was a softening on the part of EU leaders towards a lengthening of the bailout agreement which expires at the end of this month, but as far as Greece is concerned, they want something new, rather than a revised version of what is already ...

Simon Smith

Greece showdown approaching

At some point this week, we’re going to see the single currency break from the relative resilience we’ve seen so far in relation to events in Greece. The fact is that between the two pivotal players (Greece and Germany), there have been absolutely no sign of compromise. Greece has turned its back on the Trioka and is seeking EUR 10 bln of short-term funding to give it time to work something out, whilst Germany sees no need for such a move because there is nothing to be negotiated in their eyes. ...

Simon Smith

Heading for showdown

As is stands, we are no nearer to seeing the way ahead with regards to Greece as European Finance Ministers gather this week to seek a way ahead on the issue. Greece appears as convinced as ever, judging by the PM’s speech yesterday, that it will not renew the bailout program when it expires at the end of this month and the Greek Fin Min could not even agree that he agreed to disagree with his German counterpart when they met last week. The volatility seen in Greek stocks (especially banks) and ...

Angus Campbell

Nonfarm payroll may not stop recent dollar weakness

We can forget about Greece for one day at least as we focus on today’s nonfarm payroll in the US. Treasury yields in the US continue to struggle near or just above their January lows and the US dollar’s march higher has reached a peak. This dollar weakness has allowed GBPUSD to recover back above 1.5300 defying the near term resistance we earmarked around 1.5220, marking in a new one month high and now focus is on whether it can push on to the next major resistance seen around 1.5480. This is ...

Angus Campbell

Body blow for Greece

Greece took a bit of a body blow late yesterday as the ECB has made it clear that it is not willing to keep the liquidity flowing or accept the proposed solution from Greece of recalibrating the terms of existing debt structures and thus simply lending them more money. Investors shunned equities late last night as the Dow Jones dipped towards the close and one again, for the umpteenth time the FTSE 100 has rejected a move to test its all-time record high. The euro has dipped with EURUSD swiftly ...