Euro Opens Lower As Greece Steps Closer To Another Election

Euro opens the week lower as Greece takes another step further, closer to a new election in June. Greek President Papoulias leaders of major parties on Sunday hopping to form a unity government but failed. The discussions would be continued today but political leaders have expressed little optimism for a result. Indeed, far-left Syriza's leader Tsipras accused other politicians of "demanding that Syriza become an accessory to a crime" after Sunday's meeting. He reiterated that as long as they "insist on the bailout, to a policy that the people have rejected, they cannot ensure social stability." And, Tsipras said he will not attend today's meeting. It's highly likely that Papoulias will call new elections, most likely for June 10 or 17.

EU finance ministers will meet today in Brussel for what's seen as a meeting that's "short on details and long on politics." Greece will definitely be a major topic as there are various voices insisting that Greece will need to fulfil its obligation before getting the bailout aids. Spain will certainly be a focus too after European commission projected that the country will miss deficit targets for 2012 and 2013 badly. EC said last week that Spain deficit will be 6.4% of GDP in 2012 and 6.3% of GDP in 2013, comparing with the agreement of 5.3% of GDP in 2012 and 3% of GDP in 2013.

In China, PBoC announced to cut the Reserve Requirement Ratio (RRR) by -50 bps, lowering the ratio of large financial institutions to 20.0% and pumping around RMB 400B of liquidity into the banking system. The move was expected to be driven by recent disappointing economic data. Apart from weakness in trade, industrial production and inflation released last week, monetary data for April also came in lower than expected. M2 money supply growth fell -0.6% 12.8% y/y in April, below the target of 14%. New RMB loan came in at RMB 681.8B, compared with RMB 1 trillion reported in March. It is hoped that the increase in liquidity in the market would spur economic growth.

On the data front, New Zealand retail sales dropped more than expected by -1.5% qoq in Q1. Japan domestic CGPI dropped -0.2% yoy in April. Australia home loans rose 0.3% in March. Swiss PPI and Eurozone industrial production will be released later today.