- No progress from G7 pushes EUR/USD through 1.3700 as Greece stays in focus
- Greece/Troika conf. call key event of the day
- Nikkei closed Europe lower by -2.4%
- Oil at $86.69/bbl
- Gold at $1822/oz.
- NZD Westpac NZ Consumer Confidence (3Q) 112.0 vs. 112.0
- GBP Rightmove House Prices (YoY) ( SEP ) 0.7% vs. -2.1%
Event Risk on Tap
- USD/JPY quiet at 76.80
- AUD/USD recovers towards 1.0250 after steep selloff in Asia
- GBP/USD rallies to 1.5750 but capped
- EUR/USD 1.3700 caps any recovery as Greek woes weigh
Euro remained under pressure at the start of week's trade after this weekend's G7 meeting in Poland failed to produce any agreement on the Greek rescue deal renewing fears that Greece was headed for a default on its sovereign debt. Markets remain nervous as the troika of IMF ECB and EU continues to withhold the disbursement of the second tranche of bailout funds to Greece seeking further deficit reduction moves from the country. Greek Prime Minister George Papandreou cancelled a planned visit to the United States to hold an emergency cabinet meeting yesterday to address the concerns of the European officials.
Today the Greek Finance Minister Evangelos Venizolos will outline a range of austerity measures intended to assure the creditors that the country is on the way towards fiscal consolidation with some reports suggesting that the troika is demanding further reduction in government payrolls to bring the total cuts to 100,000 jobs. Such a move is likely to create further political turmoil for Mr. Papandreou's government with opposition forces already arguing that the current policy is sending the Greek economy into a tailspin.
After rebounding to 1.3700 at the start of European trade EUR/USD lost momentum and hit fresh session lows at 1.3630 as traders fear that Greece is running out of time. Some analysts have speculated that the country may default as early as September 20th when two big bonds totaling 769M euros have coupon payments due. We doubt that authorities would risk such a disorderly outcome and will most likely continue negotiations throughout the week.
Nevertheless, the pressure on the EUR/USD is likely to remain until the Greek bailout issue is resolved. With no economic data on the calendar today, the focus will remain squarely on Athens as markets await the results of the conference call between Mr. Venizolos and the troika. The conference call is scheduled to conclude at 16:00 GMT and could be the catalyst for today's trade. If the parties reach some sort of compromise the EUR/USD could stage a sharp short covering rally, but failure to make any progress will likely cause further sell off in the pair and shorts could target the psychologically important 1.3500 level as concerns mount that Greek default is imminent.
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