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Angus Campbell

ECB tightens noose

Capital controls are unlikely to be lifted for some time unless a deal can be agreed upon in the next day or so. The ECB has tightened up collateral rules for Greek banks to access its ELA and Merkel and Hollande made it clear yesterday that it is now up to Greece to come forward with new proposals since previous ones are redundant, regardless that last week end’s referendum was a question relating to the last deal on the table before the latest bailout expired. Today’s summit will put Greece ...

Angus Campbell

Unpredictable Greek saga continues

Yet another twist and turn in the Greek saga as finance minister Varoufakis steps down to pave the way for smoother negotiations to take place between Greece and its creditors. The comprehensive No vote at the week end gives Tsipras a strong mandate so get back around the table and discuss new bailout terms, even if the referendum was not technically relevant as the latest bailout has now expired, it does mean the Eurogroup will have to take note and if they want to keep the Eurozone intact, ...

Simon Smith

Waiting…

With the US Independence holiday and the impending Greek referendum on Sunday, today is likely to be a day of relative subdued trading in FX markets and elsewhere. Yesterday’s US employment report set the tone for a softer dollar. Even though the unemployment rate moved lower and down to 5.3%, the combination of a softer headline jobs numbers and downward revisions to prior months it wasn’t the backdrop that served to seal the deal on a September rate increase from the Federal reserve. Interest ...

Simon Smith

Jobs and the dollar

We should see the focus move away from Greece today with the US nonfarm payroll numbers released a day early ahead of the long holiday weekend. Yesterday we saw the dollar flip a little higher on the firmer than expected ADP numbers and today's official numbers will go some way in determining whether the Fed are able to raise rates in September. The expectation is for a moderation in growth from the 280k rise seen in the May numbers, to around 230k in June. The unemployment rate is seen moving ...

Simon Smith

Shaking off Greece

Yesterday showed that there is no second guessing events in Greece. There was no surprise to see the IMF deadline passing without payment, although Greece did put in a request for a last minute new deal, which was quickly rejected by Germany. That said, there will be a conference call today between Eurozone Finance Ministers, but hopes are not high for progress ahead of the weekend's referendum. In markets, there was a sense of stability yesterday, with peripheral bond yields falling modestly ...

Simon Smith

The message beyond FX

The single currency slowly but surely closed the opening gap yesterday. But make no mistake, this does not mean that markets are ambivalent towards the fate of Greece; it’s more the nature of spot FX. Looking elsewhere, such as the FX options market, together with equities, peripheral bond markets (Spain, Italy) and also safe haven assets (e.g. German bonds), all the signs are that the concern remains. Today, Greece is expected not to repay the EUR 1.5bln owed to the IMF. This is not a default, ...

Simon Smith

Risk aversion dominates after Greece

The Euro’s opening gap lower at the start of the Asian session is steadily being filled, with around half done so far. At the lows, the euro was 1.9% lower vs. Friday’s closing levels, but currently funds itself around 0.8% weaker vs. the dollar. You can find more on the weekend developments and the implications in our blog (“The single currency is to blame”). The situation is that the Greek financial system is half-frozen, with the stock market closed, together with banks. For the following ...

Angus Campbell

Is political will going to save Greece?

Another day passes with no deal on Greece and investors are likely to want to position themselves for negotiations to go on into the weekend by reducing exposure to risk assets. Indices are a little softer on the open and the euro is offered as we see yet another classic situation when it comes to the Eurozone with things going down to the wire. Investors however remain optimistic that a deal will be struck ahead of next week's IMF payment deadline throwing Greece yet another lifeline. If the ...

Angus Campbell

IMF’s red pen

Risk assets had their shine taken off them after investors were given a stark reminder that a deal is yet to be done and Greece’s proposals from last Sunday are subject to considerable scrutiny. The IMF had the red pen out yesterday as it made its amends to much of the pension reforms put forward and the knock back has led to further strong language from the Greek prime minister, a reaction that is unlikely to improve relations with the country’s creditors and a risky stance to take at such a ...

Angus Campbell

Dollar could receive boost from GDP

The dollar was given a boost yesterday after Fed voting member Jerome Powell spoke of his preference for a September rate hike by the FOMC and even two hikes this year. This hawkish stance saw the dollar index spike, knocking EURUSD which dipped back below 1.1200 although the euro has fought back overnight and is trading at 1.1210 this morning. The dollar will be tested today with the release of Q1 GDP data which is expected to be revised upwards from previous readings, with market expectations ...

Angus Campbell

Deal or no deal

So Greece has finally presented the EU with reform proposals that were welcomed and there was a great deal of optimism as yesterday’s trading session saw a surge in risk appetite. That risk appetite is set to continue this morning with European equities looking to add to yesterday’s gains as clear political will power looks set to save Greece from default and a nasty exit from the euro, for the summer at least. It doesn’t look like Greece will receive any further debt relief, but their ...

Angus Campbell

Greece’s day of reckoning

The ECB stepped in once again to help prop up Greek banks last Friday with an exceptional round of Emergency Liquidity Assistance funding as a record amount of euros were withdrawn from the Greek banking system. This may not however be enough to stem the exodus as today’s crunch summit gets underway to try and end the impasse. It is estimated that not much over €100 billion is deposited in Greek banks, well under half of what they were at the height of the banking crisis seven years ago and ...

Simon Smith

The next stage for Greece

Expectations were set very low going into yesterday's meeting of Eurozone finance ministers and rightly so, with no agreement and nothing in sight. The next move is a higher level summit organised for Monday. The ECB also meets again today to discuss the solvency of the banking sector, with talk on the periphery of potentials issues arising next week. We've already seen substantial deposit outflows, with the doors being kept open by the (increasing) provision of emergency liquidity assistance ...

Simon Smith

Standoff

Once again, the consensus for the first rate hike from the FOMC has slipped further into the distance as the Fed Chair gave a dovish tone at the post-FOMC meeting press conference. The first move remains conditional on further improvement in the labour market and when the Fed is “reasonably confident that inflation will move back to its 2% objective”. There was also an emphasis that the rate moves would be more gradual when they do come about. The dollar was weaker as a result, with EURUSD ...

Angus Campbell

FOMC to determine next step for dollar

The two day FOMC meeting concludes this evening with their interest rate decision and this time their quarterly economic projections will see an update to the famous dot chart. A great deal of attention has been placed on when the tightening cycle will start and it wasn’t too long ago that many were expecting tonight to mark the first rate hike, however the Fed is trying to shift the market’s focus onto the tightening cycle as a whole, which means not just when it will start, but when and where ...

Simon Smith

Sterling on the up

As markets await the Fed decision and statement tomorrow evening, the main distraction for today will be the release of CPI data in the UK. The April numbers showed the headline rate falling into negative territory. Whilst in some respects this does follow a trend seen in several other European countries, the prices declines in the UK have proven to be concentrated in a narrow band of sectors. A fair proportion of the fall in the headline rate last month was driven by air fares, which prove to ...