Greek Parliament to Vote on Austerity Package; Swiss Franc Rises to All... |
The US Dollar is broadly higher to start the week as uncertainty in the Eurozone is sending risk assets lower. This week, the Greek parliament will vote on the austerity agreement that was put in place last week, and this event risk could contribute to market volatility in the coming days. There were some positive macro headlines in the Euro region, but until these votes are completed, markets will continue to look for reasons to sell the Euro currency.
In the US, the Fed’s policy decisions that were discussed last week have added to the Dollar bullish bias. But it must be remembered that all the Fed did was to signal an end to further stimulus – not to signal a potential raise in rates. So far there has been no material suggestion that the US economy will perform well if we see the beginning of a new tightening cycle.
Later this week, aside from the Greek parliament vote, we will see CPI data from the US, Eurozone and Canada. To start the week, the EUR/USD is seen at 1.4100-1.4220 with the USD/JPY 80.30-80.90, with Asian equities generally lower.
In relation to the parliament vote on Wednesday/Thursday, the Greek Prime Minister and Finance Minister released statements suggesting they believe the austerity agreement will pass. The German Finance Minister (Schaeuble) released a similar statement, arguing that if the vote is not accepted, stability in the Eurozone will see significant risks as contagion effects could spread rapidly.
The Greek Finance Minister (Venizelos) dismissed any possibilities that Greece would leave the EU, as this would diminish the country’s ability to negotiate for aid. When asked about the size of the bailout agreement, he hinted that it could be as large as the previous loan of 110 billion Euros.
The French President (Sarkozy) and the Prime Minister of Spain (Zapatero) were both quoted as saying that banks and insurance companies in their countries are willing to rollover their Greek bonds, which would essentially extend the maturity dates for the sovereign debt.
Last week’s data showed that the German IFO rose drastically, to 123.3 for the month. Weakness in the report, however, can still be seen in the expectations index. This suggests some possible negatives for yearly GDP in Germany. UK macro data for the week will center on the final revision of quarterly GDP (from the first quarter) and speeches from BoE board members.
Friday saw new all time highs for the Swiss Franc against both the Euro and Dollar. This has been some cause of concern for the SNB and politicians have started to become vocal on the subject. The president of the Swiss Socialist Party (Levrat) has suggested that emergency measures be taken, and the president of the Swissmen (a group of industry executives) went as far as to call for the government to temporarily peg the Franc to the Euro. Negative Greek headlines will continue to create strength in the Franc, so this will be the key factor to watch going forward.
Overnight, the trade balance figures were released by New Zealand (May data) and the number disappointed estimates at $605 million NZD, on lower exports. The consensus was looking for a rise to 1 billion NZD.
