Daily Report: Risks Rebound as Greek Drops Referendum, Euro's Upside Capped

Market sentiments had another U turn as Greek PM Papandreous, facing strong opposition even from within his ruling party, dropped the call for referendum on EU's bailout. While both US and Asian stocks staged strong rebound, reactions in the currency markets are relatively mildly so far. EUR/USD is capped below 1.39 for the moment as Papandreous will still need to face a confidence vote today. And even if the government could survive the vote, it's reported that Papandreous would possibly still need to step down on a agreement with the conservation opposition. Meanwhile, failing the vote would lead to an early election. In any case, there are still much uncertainty over the Greece situation for the moment.

Focus today will also be on G20 meeting and US employment data. It's reported that G20 leaders are considering to increase the firepower of the IMF and there are calls for a financial firewall to protect the global economy from impacts of Eurozone debt crisis. For the non-farm payroll report, markets are expecting 95k expansion in the US job markets in October with unemployment rate unchanged at 9.1%. Market reactions wouldn't be as straight forward as we used to. We're facing risks including Greece, Italy, G20, and NFP. And, be prepared for a rough ride. Meanwhile, other data to be watched include Eurozone PMI services revision, Canadian job data, building permits and Ivey PMI.

In its monetary policy statement, RBA lowered GDP growth projection to 4% in the 12 months to June 2012, down from prior projection of 4.5%. CPI projection was also lowered to 2%, down from prior forecast of 2.5%. The projections are based on OCR being unchanged at the current 4.50% level. The banks said that "recent falls in commodity prices and the slowing in global demand suggest that the peak in the terms of trade has now been reached" and the decline could happen "a little faster than earlier expected". The bank also warned that "a worse outcome in Europe would adversely affect the Australian economy, and underlying inflation would be likely to decline".