The Greek talks yesterday collapsed with no new agreement. The issue at hand seems to be the requirement from the EU finance ministers that Greece sign on to the current bailout agreement before being allowed to enter a new negotiation period to alter the terms of the programme.
This is the “red line” that Greece refuses to cross, and the Greek side is perhaps a bit emboldened by the high popularity of the Tsipras government in the polls, where the government sees support rates of more than 70%.
It seems the EU commission and EU finance ministers weren’t quite on the same page, as Greek finance minister Yanis Varoufakis claimed he had the impression from the commission that an acceptable new deal would be on the table, but that the EU finance ministers failed to present this deal to the Greek side as an option.
Greek finance minister Yanis Varoufakis confers with Germany's Wolfgang Shäuble. Photo: Day Donaldson Flickr
Then the EU finance ministers issued a statement saying essentially that Greece had one week to sign on to the existing programme “or else”.
I thought that we would move quickly toward a solution over Greece this week after the noise coming from the commission late last week, but clear this is not the case and the situation is very tense and means ongoing, significant ad hoc headline risks – both ways.
This morning, despite the drama late yesterday and overnight, it looks like the market is still leaning toward a deal being struck, as EURCHF is back above 1.0600 as of this writing (and USDCHF is pulling to new highs).
Tonight we have a Bank of Japan meeting. Not much of a reason to expect new developments as the BoJ is likely in wait-and-see mode now, especially given the idea that JPY weakness is not particularly popular among the voting public and that any signals of potential new policy dynamism from the BoJ will have to wait until after the regional elections in April.
This leaves the risk to the upside for the JPY, especially if there is any hint that a weak JPY is a concern (not expected).
Chart: EURJPY
The risks from the BoJ are generally to the upside for JPY as the time is not ripe to signal any new easing. EURJPY can jump either way on ad hoc headline risks surrounding the Greek situation, but the technical situation turned bearish with the plunge back below the 135.00.
Let’s see how this one develops as the JPY is looking rather resilient/strong almost across the board ahead of tonight’s BoJ.
Note that offshore Chinese yuan is pushing the upside of the envelope again after two strong rally days as the noise level/anticipation of a move on the Chinese currency has been increasing.
The G-10 rundown
USD: No broad picture emerging here, though the strength versus euro and GBP is notable and USDCHF is pulling to new local highs this morning, so it's interesting there.
EUR: On the defensive after the Greek negotiations collapsed – ad hoc headline risks, though EURCHF still trading above 1.0600 suggests a distinct lack of panic.
JPY: Still relatively strong as we wait for BoJ news and the status of risk appetite. USDJPY is still in limbo until we get either below 118.00 (though really more like 116.00) or above 120.00.
GBP: Watching the CPI release today, though the Bank of England has explicitly stated it will look through very low inflation levels in the near term without significant concern levels. GBPUSD support is important at 1.5350/00 for keeping the outlook to the upside (I am looking for an excuse to sell, and a break and close back below 1.5300 would be a start).
AUD: Getting ambitious within the range in AUDUSD. Next focus for whether we extend out of the range is the 0.7850 area and then the structural resistance up at 0.8000/50.
CAD: Rally attempt yesterday partially beaten back as crude oil prices remain strong. Watching 1.2400 area for whether we remain in the upper range or consolidate further.
NZD: Struggling to get fresh momentum above 0.7500 in NZDUSD and important structural resistance looms at 0.7600/50.
SEK: EURSEK is pushing down on support ahead of the CPI release – important to keep the closing levels above 9.500 if we’re to keep the focus higher.
NOK: Looking for excuses to get short NOK, but we may have to wait for the oil rally to turn tail.
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