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Markets

Euro Rally Stalls Ahead of 1.3300

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Top Stories

  • Greek Parliament passes austerity vote
  • Japanese GDP -0.6% vs. -0.3%
  • Nikkei up .0.58% Europe up 0.46%
  • Oil at $99.66/bbl
  • Gold at $1731/oz.

Overnight Eco

  • AUD Home Loans (MoM) (Dec) 2.3% vs. 1.9%
  • JPY Gross Domestic Product (QoQ) (Q4) -0.6% vs. -0.3%
  • JPY Tertiary Industry Index (MoM) (Dec) 1.4% vs. 0.9%
  • CHF Producer and Import Prices (MoM) (Jan) 0.0%
  • EUR German Wholesale Price Index (MoM) (Jan) 1.2% vs .0.2%

Event Risk on Tap

    Price Action

    • USD/JPY ranges between 77.5--77.75
    • AUD/USD runs through 1.0750 on better risk flows
    • GBP/USD stalls at 1.5800
    • EUR/USD stalls ahead of 1.3300

    Risk FX received a boost in early Asian session trade today after Greek Parliament passed the austerity measure package required by the Troika staving off the prospect of hard default for the country. EUR/USD rose to a high of 1.3283 while Aussie broke through the 1.0750 level as risk sentiment turned positive at the start of the trading week.

    The vote was overwhelmingly in favor of the deal with 199 in favor and 74 opposed, with 27 abstentions or blank ballots. The Parliament also gave the government the authority to sign a new loan agreement with the foreign lenders and approve a broader arrangement to reduce the amount Greece must repay to its bondholders.

    Although the vote was a move in the right direction it requires implementation and the need for Greece to find additional reductions of 300 million euros. German economics minister Phillip Rosler, who had been a harsh critic of the Greek budgetary process, voiced his approval of the vote providing further lift to EUR/USD at the start of the European trade. Germany will now have to provide Parliamentary approval as well ahead of the March 15th deadline when Greece faces at 15 Billion euro payment.

    While tonight's Greek Parliamentary vote may have avoided immediate threats to the EZ financial sector by removing the risk of default, it remains to be seen if the austerity measures required by the Troika will have any realistic chance of success. The deal called for draconian cuts in the Greek economy including the reduction in the benchmark minimum wage of 22% and 150,000 government layoffs by 2015 all while the country remains ravaged by five years of recession and with unemployment hovers at 21%t. The massive demonstrations in Athens and elsewhere today were a testament to the fact that political risks remain quite high.

    Elsewhere in Japan the GDP data contracted by -0.6% marking the first drop in two quarters. The Q4 results were weaker than expected, with the median forecast of economists calling for a -0.3% q/q contraction. Net exports slumped in the fourth quarter while gains in private consumption and capital expenditures were largely offset by a drop in private-sector inventories. Exports and production have been badly hurt by the toxic combination of slowdown in in global economic demand , continued appreciation of strong yen and the fallout from last year's supply chain breakdown in flood-hit Thailand. Adding to its woes Japan posted a trade deficit for the fourth straight month in December, due in part to a sharp increase in imports of oil and gas to fuel electricity generation and make up for the closure of many of the nation's nuclear power plants.

    USD/JPY saw little reaction to the news trading at 77.70 in quiet European dealing, but the pair has rebounded nearly 200 point since setting it recent lows at 76.02 and could mount a challenge on the 78.00 figure this week if US economic data proves supportive.

    With no economic data on the EU calendar trading in North American session may prove to be quiet as EUR/USD tries to consolidate its gains. As we noted earlier, "The EUR/USD has held up remarkably well over the past several weeks as markets anticipated the prospect of a deal in Greece, but may now face some profit taking as it tries to approach the 1.3400-1.3500 region in the upcoming days, especially given the fact that the massive short positioning skew has been reduced over the past several week, dampening the chance of further short squeeze."

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    The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


    The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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