Today it looks like we may finally be able to shift the focus from Greece for a while as its parliament moves to vote through the bailout deal, with the assumption that the opposition and a minority of the Syriza party will provide enough of a majority.
And despite how bad this deal is for Greece in the longer run, there are reasons to expect that the near term could see a considerable improvement in Greece’s fortunes as the intensity of the crisis/uncertainty lifts and banks are able to function again.
At the same time, Reuters got hold of an IMF report suggesting that Greece’s debt sustainability woes are far larger than the EU is addressing with its latest plan (which sows the seeds for a possible Grexit further down the road…).
Besides the Greek vote, today’s other critical event risk is US Federal Reserve chair Janet Yellen’s testimony before a House panel today. The statement will be released at 1230 GMT, but she will not actually deliver the testimony until 1400 and then there will be a marathon Q&A session with the usual political posturing from the various members of the House committee.
Again, our expectation is for a cautiously optimistic outlook, which is somewhat more hawkish than the very complacent market is positioned for.
The other big event risk is today’s Bank of Canada rate decision, with the market only slightly in favour of a cut – meaning large potential for a two-way reaction in the immediate wake of the decision. But even if the BoC doesn’t cut, dovish, cautious guidance is likely, meaning any downside reaction in USDCAD may be limited, provided the USD is strong elsewhere in the wake of today’s Yellen testimony.
Important day for CAD traders
The 1.2835 high from earlier this year is the highest level since 2009, and is the last resistance level ahead of the 1.3000 level, which was the clear resistance back in early 2009 as well. Support comes in the 1.2625-1.2550 zone.
Elsewhere, we have a heavily populated economic calendar today, including UK earnings/employment data as EURGBP nears 0.7000 and quarterly CPI out of New Zealand, so stay on your toes, and see specific comments in the G-10 rundown below.
The G-10 rundown:
USD: Absorbed the blow quite well from the very weak retail sales report yesterday – next key event risk is today’s Yellen testimony, which will probably be a “keep all options on the table” without any decided hawkishness – still, the market is pricing very low probability of a September move, so the bar for hawkish surprises is lower than ever.
EUR: Looking weak as EURUSD dips back below 1.1000 this morning. Looking forward to Greek passage of the latest bailout deal with the opposition and Syriza minority likely enough to ram it through. This encourages euro “carry trading” and perhaps trades like EURAUD and EURCAD.
JPY: Bank of Japan did little besides trimming their growth and inflation forecast (the latter due to weak energy prices) and hoping that the recovery will continue to gain steam. Kuroda is out speaking at a long press conference this morning.
GBP: Blasted higher on Bank of England governor Mark Carney’s comments yesterday, with EURGBP challenging close to 0.7000 this morning and there may be more room for upside in GBP there, though sterling strength versus the dollar may run into resistance in the key 1.5650/1.5700 area unless today’s batch of important earnings and employment data from the UK further boosts the prospects for moving forward that first BoE rate hike.
CHF: Passively trading slightly stronger versus the very weak euro - not sure where the catalysts are for CHF until the Swiss National Bank decides what it is going to do, unless the focus begins to shift to interest rate differentials (note that long US rates, for example are at the upper end of their range.)
AUD: Showing resilience, but can AUDUSD really take back the 0.7500/50 zone? That’s the key resistance for now as downside momentum has faded over the last several days.
CAD: Pulled back a bit stronger as oil found support yesterday, with today’s focus on whether the BoC cuts (market slightly in favour of a cut) and just as important, the forward guidance. CAD weakness from here on a dovish BoC will likely be mostly limited to USDCAD, where we watch whether the 1.2835 multi-year high is taken out soon.
NZD: Key data up tonight, especially the CPI, which will need to come in very weak to continue to drive NZD underperformance, as positioning on the weak kiwi theme may have gotten a bit overdone in the nearest term.
SEK: A shockingly weak Swedish inflation release yesterday for June (-0.4% year-on-year on the headline and only +0.6% y-o-y on the core, with the month-on-month at -0.2%) saw SEK selling off again, though the euro is so weak that EURSEK was turned back once again in the 9.40 area. May be more interesting to look for SEK weakness against NOK.
NOK: Back and forth with the fortunes of oil as Iranian nuclear deal was apparently already in the price before it was announced. NOK could prove resilient here if oil stabilises further and EURNOK bears may wake up on a close down through 8.85.
Economic data highlights
- Australia Jul. Westpac Consumer Confidence fell to 92.2 vs. 95.3 in Jun.
- China Q2 GDP rose +7.0% YoY vs. +6.8% expected and vs. +7.0% in Q1
- Japan Bank of Japan kept Monetary Base expansion target unchanged at ¥80T/year as expected
Upcoming economic calendar highlights (all times GMT)
- Sweden Riksbank minutes (0730)
- UK Jun. Jobless Claims Change (0830)
- UK May Average Weekly Earnings (0830)
- UK May ILO Unemployment Rate (0830)
- UK May Employment Change (0830)
- Switzerland Credit Suisse (SIX:CSGN) ZEW Survey (0900)
- Canada May Manufacturing Sales (1230)
- US Fed Chair Yellen releases semi-annual testimony to Congress (1230)
- US Jun. PPI (1230)
- US Jul. Empire Manufacturing (1230)
- US Jun. Industrial Production and Capacity Utilization (1315)
- Canada Bank of Canada interest rate decision (1400)
- Canada Bank of Canada Governor Poloz press conference (1515)
- US Fed’s Mester to Speak (1625)
- US Fed releases Beige Book (1800)
- US Fed’s Williams to Speak (1900)
- New Zealand Jun. BusinessNZ Manufacturing (2230)
- New Zealand Q2 CPI (2245)
- New Zealand Jul. ANZ Consumer Confidence (0100)