Tag Archives: Greece

EUR Rebound

The Euro rebounded strongly yesterday 02nd June amid optimism that Greece is moving closer to reaching an agreement with its international creditors and reports that the European Central Bank increased the level of emergency cash available to Greek banks by €500m. Moreover, inflation data released from the Eurozone suggested that deflation risks have subsided as the Consumer Price Index (Core YoY) beat market expectations at 0.90%.

Today 03rd June, European Commission President Jean-Claude Junker is set to meet with Greek Prime Minister Alexis Tsipras and the European Central Bank will also meet to make its interest rate decision. It is expected the European Central Bank will hold its key interest rate at the record low of 0.50% whilst possibly accelerate their EUR60bn per month asset purchase program. The outcomes of both meetings will be watched closely by market participants.

Elsewhere we have a raft of data due out of the US this afternoon including mortgage approvals, employment data, trade balance and Purchasing Managers Index data. This evening the Federal Reserve will also release its Beige Book economic report.

As a result the Euro has spiked higher against the US Dollar and the Pound with EUR/USD hitting a high of 1.1193 and EUR/GBP pushing through 0.73p (GBP/EUR below 1.37). Elsewhere, GBP/USD has traded between 1.5375 and 1.5215.

Go Euro, Go

Today we will see European Finance ministers meet once again to further sure up the current deal regarding Greece. Discussion is likely to focus on the proposed supervisory role for the European Central Bank. Whilst in theory the majority of European finance ministers would be in favour of such a position, it is when it comes to the ironing out of the fine details that there is the potential for disagreement. Notably, leaders of countries outside of the Eurozone have expressed concern that they could be treated as second tier members of the new supervisor, a situation that would clearly be untenable.

Despite the meetings taking place in Europe today and across the pond regarding the fiscal cliff, the Euro has continued to strengthen against Sterling and the Dollar on the back of the Greek debt agreement reached last week. The Euro has risen against both the Pound and Dollar today, with EUR/GBP hitting 0.8128 (GBP/EUR 1.23) and EUR/USD rising to 1.3107. Sterling has also risen against the Dollar today, hitting the key level of resistance at 1.6124 that was mentioned in yesterday’s blog. Cable is continuing to test this level and should it breakthrough, we could well see 1.63 targeted next, however substantial movement will be dependent on the progress of talks regarding the fiscal cliff.

Elsewhere the Reserve Bank of Australia has cut interest rates for the second time in three months. Interest rates have been cut to 3%, equal to the half century low set in 2009, as the Australian economy continues to battle with falling commodity prices and a strong currency. Despite the interest rate drop early this morning, the Aussie Dollar has fared well, buoyed by the positive Chinese data released yesterday and also potentially because of the fact that some market participants felt the rate could have been cut even further. GBP/AUD is currently trading at a daily low of 1.5373.

Mark Webster

Increased Optimism

The Dollar has weakened against the majority of its counterparts this morning following increased optimism regarding the Eurozone after a debt agreement concerning Greece was reached in Europe last week. Whilst some market analysts argue that the current deal is insufficient, this agreement has at the very least sent a message to global markets that Europe will not let Greece fail, and it will remain in the Eurozone. This has led to rising indices across Europe, most notably the Athens Composite, which is up 9% over the last two months. Additionally, this morning Angela Merkel has, for the first time ever, indicated that Germany may accept a write off of Greek debt. This could be a very significant step in creating the first truly viable path for Greece to escape the black hole that it is currently in, however the key word here is; ‘may’.

Furthermore, China has posted positive manufacturing figures this morning. The Chinese HSBC Manufacturing PMI hit 50.5 this month, increasing ever so slightly from 50.4 last month. This has consequently, along with the European factors above, increased risk appetite among investors and has resulted in market participants selling off their ‘safe haven’ Dollar holdings in search of riskier assets.

This afternoon we have manufacturing data and PMI figures coming out of the US, should they be positive we could see the Dollar strengthen slightly, however the main focus for Dollar movement this month will be the ever approaching the fiscal cliff. Should little progress be made on this issue and the January 1st deadline look increasingly doubtful, we could see the Dollar strengthen substantially.

Sterling is up today against both the Euro and the Dollar following positive UK manufacturing data. The UK Markit Manufacturing PMI hit 49.1 this morning, not only increasing from last month but also beating market expectations of 48.0. Following the release of the figures at 09:28 this morning, Sterling has risen to a daily high of 1.2325 against the Euro and GBP/USD has broken through a downward trend hitting an interbank high of 1.6086 before falling back a little. The current rate is hovering around 1.6067, should the rate push above this we could see 1.6124 targeted. Should the dollar not break through this level, the rate may well fall back towards 1.60.

Please find a summary of this week’s economic calendar below:

03.12.12
Eurogroup Meeting
01:45 Chinese HSBC Manufacturing PMI
08:53 German Markit Manufacturing PMI
09:28 UK Markit Manufacturing PMI
13:58 US Markit Manufacturing PMI
15:00 US Construction Spending
15:00 US ISM Manufacturing PMI

04.12.12
European Finance Ministers Meeting
03:30 Australian RBA Interest Rate Decision
09:30 UK PMI Construction
10:00 EU Producer Price Index
14:00 Bank of Canada Interest Rate Dec ision

05.12.12
08:53 German Markit Services PMI
08:58 EU Markit Services PMI
09:28UK Markit Services PMI
10:00 EU Retail Sales
13:15 US ADP Employment Change
15:00 US Factory Orders
15:00 US ISM Non-Manufacturing PMI

06.11.12
09:30 UK Total Trade Balance
10:00 EU GDP
11:00 German Factory Orders
12:00 UK BOE Interest Rate Decision
12:45 EU ECB Interest Rate Decision

07.12.12
00:01 RICS Housing Price Balance
09:30 UK Industrial Production
09:30 UK Manufacturing Production
11:00 German Industrial Production
13:30 US Average Hourly Earnings
13:30 US Nonfarm Payrolls
13:30 US Unemployment Rate

Mark Webster

Deal or No Deal?

Deal. A deal has definitely been done, but was it a good one? Let alone good, was there even any point to it? These are the questions that market experts are starting to ask as doubts grow as to whether this deal will actually do anything to solve Greece’s long term national debt problem.

European finance ministers last night, as expected, agreed to release the next tranche of financial aid to Greece. The meagre sum of €43.7 billion Euros worth of loans starts to be paid to the debt ridden country from December. It is believed that this will help plug the gap in the country’s finances until the end of 2014, however for any true progress to be made many market analysts are calling for at least some of Greece’s outstanding debt to be written down. It is becoming ever more apparent that simply applying increasingly stringent austerity is not having the desired effect, in fact it could even be exacerbating the problem.

Closer to home, yesterday George Osborne announced who is set to succeed Sir Mervyn King as Governor of the Bank of England next year. The decision to name Mark Carney, currently the governor of the Canadian central bank, seems to have taken most people by surprise. However, whilst some of the decisions that Mr Osborne has made whilst Chancellor of the Exchequer have come under scrutiny, this one seems to have been well received and was even deserving of approval from his opposite number, shadow Chancellor Ed Balls. Mr Carney has been widely commended during his time at the Canadian central bank, where he has successfully navigated Canada through some of the toughest global economic conditions in living memory, with Canada fairing much better than many other countries during this time.

This morning Sterling improved to a morning high of 1.2384 against the Euro, whilst the Dollar has also risen against the Euro, with EUR/USD hitting 1.2935. The weakening Euro comes on the back of the agreement made last night between European finance meetings, as markets, whilst relieved a deal was made, are concerned that it will do little to stabilise Greece’s finances in the long term. We could see further movements this afternoon as figures for US Durable Goods Orders are released. Positive results could see the Dollar appreciate further and potentially compound the weakening Euro.

Mark Webster

Once, Twice, Three times… an Agreement

It is no surprise what the focus of the markets will be today. With little economic data due out and nothing of any importance in comparison, attention will remain concentrated on the European finance ministers meeting. Greece is going to go bankrupt. Greece is going to go bankrupt. There are only so many times that you can say this before it actually happens and we are getting ever closer to the point when it will be said for the last time, and Greece actually does run out of money. With this in mind, it is almost certain that some sort of an agreement will be reached today and the next tranche of financial aid released to Greece. Following this, we could actually see a marked improvement in European stocks and a strengthening of the Euro, as such an agreement would remove a substantial amount of uncertainty from the markets, at least for the time being.

Should the current Eurozone crisis be averted today, attention is likely to shift to the next global financial obstacle causing discomfort for the markets – the US fiscal cliff. The problem facing President Obama is a ticking time bomb in the form of $607 billion worth of tax increases and spending cuts due to come into effect in January. Unless some sort of an agreement can be reached in Congress, the recession inducing cliff will be hit imminently and the ability of government officials in Washington to compromise will be key to reducing the uncertainty within the markets.

Please find a summary of this week’s economic calendar below:

26.11.12
08:15 CHF Employment Level
11:30 EU Finance Ministers Meeting
12:00 German Consumer Confidence Survey

27.11.12
07:00 UK Nationwide Housing Prices
09:30 UK GDP
09:30 UK Total Business Investment
13:30 US Durable Goods Orders
13:30 US Fed’s Bernanke Speech
15:00 US Consumer Confidence
15:00 US Housing Price Index

28.11.12
13:00 German Consumer Price Index
13:00 German Harmonised Index of Consumer Prices
15:00 US New Home Sales

29.11.12
06:45 CHF GDP
08:55 German Unemployment Change
10:00 EU Business Climate
10:30 BoE’s Governor King Speech
13:30 US GDP
13:30 US Personal Consumption Expenditures Prices
15:00 US Pending Home Sales

30.11.12
UK Inflation Report Hearings
German Bundestag Vote on Greek Aid
07:00 German Retail Sales
10:00 EU Consumer Price Index
10:00 EU Unemployment Rate
13:30 US Core Personal Consumption Expenditure
13:30 US Personal Income

Mark Webster

Round and Round We Go

The Euro strengthened to a three week high against the Dollar and a month high against Sterling yesterday as optimism grows that a deal on Greece will be reached. Considering that a Greek default, bankruptcy and inescapable exit from the Euro would otherwise be inevitable, an agreement to extend financial aid to Greece seems to be guaranteed, as does a continuation of the Eurozone debt crisis merry-go-round.
After putting up substantial resistance to altering the current Greek target for a debt to GDP ratio of 120% by 2020, the International Monetary Fund has softened its stance and is said to be willing to lessen the target to 124%, a figure still considered viable. This will still leave a gap which is believed to be around 10 billion Euros, a hole that will need to be plugged and the mechanics of how this will be done are still to debated, but this is likely to be easily overcome.

Trading is relatively flat this morning following the release of German GDP and IFO Business Climate figures, as well as UK Mortgage Approvals. The data released so far has been positive across the board which has kept trading relatively flat, apart from a few minor spikes following the immediate release of the figures. The Pound is currently trading close to 1.2342 against the Euro and the rate is continuing to hover at this level where the Pound has found a reasonable amount of support. Should Sterling drop through this, the next level of stiff support for the pound is at 1.2248.

We could also see the Pound drop back off against the Dollar later today, potentially falling back to 1.5911 which is 38.2% retracement of 1.5267 and 1.6309, a level which was tested earlier in the week before the Pound eventually broke through. A break below 1.5911 would likely see support at 1.5882 being reached, with 50% retracement at 1.5788 being targeted after that should the decline continue.
With little more economic data due out for the rest of the week, attention is now likely to turn to the European finance ministers meeting on Monday. As this will be the last meeting before Greece is set to run out of money, it is now expected, and almost certain, that an agreement will be reached and the next tranche of financial aid granted to Greece. Therefore, we could see substantial price movements on Monday, with the Euro likely to be bullish should an agreement on Greece be reached without discord.

Surprise, Surprise

The Pound is only slightly higher against the Euro this morning after paring substantial gains made in the early hours following the conclusion of the European finance ministers meeting in Brussels. GBP/EUR hit 1.2489 this morning before dropping back down to its current level of 1.2438. Similar price movement was experienced by the EUR/USD which dropped off to 1.2735 before climbing back to its current level of 1.2790. Such movements shouldn’t come as much of a surprise as no concrete decision was made last night regarding Greece’s future. The only thing that is guaranteed now is that uncertainty within the Eurozone will continue.

As ministers failed to agree on a definitive rescue plan for Greece, again, any further aid payments will remain on hold until the next emergency ministers meeting scheduled for November 26th, hopefully Greece will manage to remain solvent until then. That said, no firm decision was ever going to be made yesterday on whether or not to release the final tranche of financial aid. Various European governments, including Germany, are yet to weigh in on the issue, and the Troika still needs to confirm that the Greek government has delivered on certain economic indicators, all of which is necessary before any final decision can actually made.

Looking ahead today, there is economic data due out in the US this afternoon. US Initial Jobless Claims and US Reuters Michigan Consumer Sentiment Index are both due to improve, with US Markit Manufacturing PMI expected to remain at 51. If such results meet, or even better, market expectations we could see the Dollar strengthen further against the Euro and also recover some of the losses it has suffered against Sterling over the past few days.

Tension in the Air

The atmosphere is tense in Europe this morning as European finance Ministers make final preparations before a key meeting tomorrow regarding the situation in Greece. To say that reaching an agreement tomorrow is crucial would be an understatement. Greece quite frankly is facing imminent collapse, if this were to materialise it would invariably cause severe problems for the rest of the already troubled Eurozone. The rhetoric coming out of Europe today and at the weekend seems to be one of unanimous determination to reach a final solution, Christine Lagarde commented:

“I am always trying to be constructive but I am driven by two objectives…to build and approve a program for Greece that is solid, that is convincing today, that will be sustainable tomorrow, that is rooted in reality and not in wishful thinking.”

One would like to think that all European finance ministers share such positive intentions, however if previous meetings in Europe are anything to go by, it is going to take a lot more than a simple desire to create a sustainable program for Greece, to fix the problem.

In the US concerns over the looming fiscal cliff have eased following a Speech by US President Barack Obama, in which the President expressed confidence in his governments’ ability to reach an agreement on how to deal with the cliff. This has led to the Dollar weakening against the majority of its counterparts this morning. Notably the Pound has risen for the third straight day against the Greenback following positive UK housing data that came out this morning.

Please find a summary of this week’s economic calendar below:

19.11.12
00:01 UK Rightmove House Price Index
05:00 Japanese Leading Economic Index
15:00 US Existing Home Sales Change

20.11.12
Bank of Japan Interest Rate Decision
European Finance Ministers Meeting
00:30 Australian RBA Meeting’s Minutes
07:00 German Producer Index
13:30 US Housing Starts MoM
17:15 US Fed Governor Bernanke Speech

21.11.12
UK Bank of England Minutes
09:30 UK Public Sector Net Borrowing
13:30 US Initial Jobless Claims
13:58 US Markit Manufacturing PMI
14:55 US Reuters/Michigan Consumer Sentiment Index

22.11.12
08:28 German Markit Manufacturing PMI
08:28 German Markit Services PMI
08:58 European Markit Manufacturing PMI
08:58 European Markit Services PMI
08:58 European Markit PMI Composite
15:00 European Consumer Confidence

23.11.12
European Council Meeting
07:00 German GDP
09:00 German IFO Business Climate
09:00 German IFO Current Assessment
09:30 UK BBA Mortgage Approvals
13:30 Canadian Consumer Price Index

Mark Webster

Is That a Fat Lady Singing?

Christine Lagarde, the Managing Director of the International Monetary Fund confirmed last night that European Finance Ministers remain committed to ensuring Greece gets ‘back on its feet’. Lagarde remarked that the fight to save Greece was ‘not over until the fat lady sings’. If such strong rhetoric actually translated into affirmative action then possibly, just possibly, Greece would now be in some sort of situation comparable to that of a recovery. However this has not been the case, as we have become accustomed to over the last four years, and as I mentioned in my blog earlier this week, European leaders, Commissions, and Central Banks are all guilty of persistently dodging and delaying key decisions that could have proved incisive in providing Greece, and in turn the Eurozone, some sort of path to recovery. Crunch time must surely come next week as European finance ministers will meet once again to discuss the situation in Greece, and as the debt ridden country nears the brink of collapse as bankruptcy looms and public protest intensifies, the time for action has never been more pressing.

From one debt problem to another. On the other side of the Atlantic today, talks regarding another monumental debt problem will begin as congressional leaders meet at the White House with President Obama for the first time since the election. How well both sides can negotiate the US away from its current collision course with the infamous fiscal cliff will be vital. Markets are currently on tenterhooks as the ever approaching $600 billion cliff looms ever closer, threatening the current Wall Street bull.

Other than the meeting at the White House today there is very little economic data due for release. Therefore markets are likely to be somewhat subdued today, especially as they wait to see how the talks in the US today, and Europe next week, progress. That said, the Pound is up against the Euro this morning after recovering some of the losses it suffered yesterday, hitting 1.2465 at 09:45. The Euro also lost some of the gains that it had recouped against the Dollar earlier this week as it fell to 1.2722 this morning after finding strong resistance around 1.28 yesterday afternoon.

Mark Webster

The Wait Goes On

Last night European Finance Ministers prolonged the inevitable yet again and ensured that unnecessary uncertainty would remain within the markets for at least a further week. Greece could well go bankrupt this week; however this is not going to happen. European leaders won’t allow it to happen, and it is this very reason why markets are becoming frustrated. Frustrated with European finance ministers and their inability to reach a compromise over exactly how Greece’s ever increasing black hole should be plugged.

Ministers did however manage to push back to 2022 the goal of getting Greece’s debt down to a sustainable level, although there was still disagreement amongst ministers over this issue, most notably from IMF Managing Director Christine Lagarde. This miniscule achievement has done little to help reassure the markets this morning as the Euro is down against Sterling and has hit a two month low against the Dollar. Such movements coincided timely with the release of EU and German confidence surveys, for both of which the results were appropriately down.

The Pound’s strength this morning is likely down to the positive Consumer and Producer price index figures released at 9:30. The UK Consumer Price index (YoY) figure hit 2.7%, surpassing market expectations of 2.3%, whilst the UK Producer Price Index – Output (YoY) remained flat at 2.5%. This led to a sharp spike in GBP/EUR as it hit 1.2546 and GBP/USD reached 1.5904 before leveling out. With little more economic data due out for the rest of the day other than the US Monthly Budget Statement at 19:00, the driving force behind any rate movements today will be the ever worsening situation in Greece.

Mark Webster