STO Fundemental - JPY, EUR, NZD and the Greek Bailout

With US and Canadian markets closed for respective public holidays, the agenda is once again set to be rather subdued. As such, volumes could be thin and in turn, this may lead to some exaggerated volatility, especially off the back of the limited fundamental data releases we do have.

USD/JPY and the EUR


Our prop desk is looking relatively quiet with those market holidays in North America suppressing activity. We are seeing some interest in USD/JPY positions, whilst the Euro - EUR is also looking susceptible ahead of the seemingly inevitable impasse over Greece at today’s Eurogroup meeting.

Fundamentals - JPY, EUR, NZD and the Greek Bailout


New Zealand PPI data released shortly after the trading week got underway has limited impact on Kiwi dollar - NZD crosses although the rally against the Yen - JPY was worth nothing. However this seems to be as much about the position having been sold down heavily in the run up to the weekend break, rather than being driven by the numbers – although that PPI Output print for Q4 coming it at 1.5% versus 0.9% is perhaps something worth being mindful of – it doesn’t sit all that well with the RBNZ’s apparent long-term dovish stance.

German PPI numbers were released this morning at 7am GMT, coming in notably better than expected. This has lead to some support in terms of pairs like EUR/USD, but this print is certainly a mixed blessing. The problem here is that it drives even deeper divisions in terms of economic performance across the Eurozone and will heighten German calls for the ECB to put an end to its lax monetary policy. Usually such debates would sit very much on the side lines, but as with the Greek bailout dilemma, this is going to sit squarely on the agenda as the campaigning for German elections picks up. With populism having reared its head visibly twice in the last eight months – Brexit and the US Presidential elections – the potential toxicity of overshoots like this cannot be underestimated.

Data out of the UK in the coming hours is limited but in light of Friday’s disappointing retail sales print, expect the CBI trends total orders reading at 11am GMT to be under a degree of scrutiny. Economists are already forecasting a month-on-month decline and although this is a relatively low-priority number, a notable decline here could be sufficient to further rattle the pound, especially against the greenback.

Eurogroup finance ministers meet today and expectations had been that a deal would be ratified over the next bail-out payment that the Greek government needs to avoid the prospect of bankruptcy. The expectation now is that no agreement will be tabled and although Athens still has until July before it defaults on any payments, the problem is any delay pushes talk of a bail out into the European election season. This is something that is easier settled between technocrats rather than on the campaign trail, so anything that hints at progress – even if we’re short of a definitive agreement - should be positive for the common currency.

This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.

STO Review