Market Drivers for June 15, 2015
Europe and Asia
GBP: Rightmove HPI 3.0%
EUR: Trade Balance 24B vs. 20B
North America
USD: Empire 8:30
CAD: Manufacturing 8:30
USD: IP 9:15
The euro was marked down at the start of trading this week, slipping to a low of 1.1188 after reports that the negotiations between Greece and its creditors broke up over the weekend after only 45 minutes of talks. But the pair rebounded in morning European trade after reports that the Greek negotiating team was to meet with PM Tsipras at 1200 GMT later today.
There is no doubt that the currency market is in the midst of full-on Grexit fatigue as the on and off nature of talks and the lack of any progress either way has frustrated both longs and shorts with the market reacting less and less to each daily headline.
There are even reports that many institutional traders have turned to options in order to avoid the whipsaw volatility of spot. Still, the general view of the market remains relatively complacent with options markets putting little premium on EUR puts as currency traders still view a Grexit as more of a sideshow rather than an existential threat to the euro.
Away from the daily Grexit saga the underlying fundamentals in the EZ are actually improving, with QE seemingly able to arrest the dis-inflationary pressures in the region as the latest string of CPI readings has turned positive. ECB member Nowotny echoed that sentiment today, stating that he sees the first signs of success from QE.
If Greece does exit the Eurozone, the risk may not be existential, but nevertheless serious, as the temporary impact could be the deflationary unwinding of some of the progress achieved by QE. That is why EZ officials continue to work hard at establishing a deal and why the ECB remains committed to its liquidity operations for the time being.
On the economic side, the calendar was sparse today with only the EZ Trade Balance on the docket; The reading beat its mark as the surplus rose to 24.3B versus 20.0B eyed. The region is clearly starting to benefit from better global demand and a lower euro. Absent the Greek default risk, it would probably see better flows into the EUR/USD as deflation fears have eased. But until the Grexit issue is resolved the pair is likely to seesaw in the current range.
In North America today the market will get a look at the Empire Manufacturing Index and the IP data, but neither release will have much impact on trade as focus turns to this Wednesday's FOMC meeting and presser. No one expects any surprise announcements from the Fed, but traders will be watching Ms. Yellen's posture and tone which in the last month has turned decidedly hawkish as the Fed chief signaled that she is getting ready to normalize rates. But until she speaks, volatility in FX may remain muted as markets continue to tread water.