Keeping Up With Greece

The euro gapped higher against the US dollar at week’s open, whereas not a significant step has been taken in negotiations between Greece and the EU. The latest Greek proposals are somewhat seen as a good basis for the future. Until a deal is sealed, however, uncertainties persist.

According to Reuters, over 4 billion euro worth of deposits left Greece last week; another 1 billion euro is expected to fly out today. The liquidity conditions are getting dangerously tight. There remain no more than a couple of hours for Athens to avoid default.

CAC, IBEX and DAX rally on the fragile optimism. MILAN:BMW and Daimler (LONDON:0NXX) started the week 4% higher.

Cheerfulness spills over the UK markets. FTSE stocks are bid this morning, with Randgold (LONDON:RRS), Anglo American (LONDON:AAL) – last week’s front-runners – slightly paring gains.

Euro-pound formed a double bottom at 0.71255 on Friday. Despite the early euro appetite, intensifying BoE-hawks keep the cross below the 50-day moving average. Option barriers trail below 0.7190/0.7100 for the week ahead; 180.9mn waits to be expired at distant 0.70p today.

McCafferty sees BoE hike in 2015

Bank of England’s McCafferty mentioned that a 2015 rate is possible. The implied probability extracted from sovereign markets gives more than 70% chance for a rate hike over the next six months. GBP/USD consolidates gains at about Fibonacci 50% on Jul 14 – Apr 15 retracement (1.5878), the RSI up to 72% suggesting a pause/correction is healthy. Support could be found at 1.5775/1.5815 (optionality / May pick) as stronger positive momentum indicates a further rise to 1.6189 (Fib 61.8%). Key support stands at 1.5480 (200D MA).

Equity markets move higher on deluded optimism

European indices are forging higher this morning, buoyed by some strange sense of optimism that today will be the day we get some clarity on a Greek deal. The ECB have, as expected, raised the ELA ceiling to furnish liquidity to the ailing Hellenic banks. This is little more than a sticking plaster, but seems to be keeping markets contented for now.

At this stage, it’s difficult, if not impossible, to find a single market participant who isn’t completely jaded by the ongoing Greek negotiations. The feeling of déjà vu continues today, as it’s not the first time that Greek officials have submitted the wrong documentation. These hours are critical, and finding a mutually beneficial outcome at the moment seems something of a fairy-tale.

The UK market is having a firm morning with widespread gains, as a combination of positive movements in Greece and weekend M&A press drive stocks higher. Trading around the 6800 and surpassing the 200 day moving average barrier puts a bullish complexion on the index this morning, with all sectors in the green.