Greece managed to push through with its debt swap as 83.8% of creditors agreed to the deal by yesterday evenings deadline. This figure was made up from 85.8% of debt subject to Greek Law and 69% of international debt holders. This has given Greece the option to force the remaining creditors to accept the deal by implementing the Collection Action Clauses. If they decide to force this through then the International Swaps and Derivatives Association would have to make a decision on whether it could be viewed as a “credit event” or default and this could have dire consequences for Europe and the Euro. We did see the markets rise yesterday on the back of rumours that Greece would push through the deal and this saw the Euro strengthen against Sterling and the Dollar. This move will likely continue in this direction but if there is news of a default we could see a sharp move with Euro weakening. 1.3220 looks like a key level for EUR/USD as we have seen it return to this figure a few times over the last few weeks on both the up and down sides and it seems content to stay at this level for the time being.
It is another busy day in terms of data with plenty of news out worldwide. This morning we have seen Germany’s trade balance increase from €13.90Bn to €14.20Bn which beat expectations as many thought their trade balance would fall. This was a good figure for the Eurozone as it shows Germany’s economy is not slowing down and we saw Euro strengthen against sterling off the back of it. At 9.30 there was a mixed set of data out of the UK with good numbers for PPI both input and output but worse figures for manufacturing and industrial production. A slowdown in manufacturing and industrial production is not great for the UK as we are relying on what little industry we have left to keep us going during the tough years we are currently facing. The key figure out today is the US non-farm payroll figure out at 13.30 and also the U.S. trade balance figure is released at the same time. The jobs figure is likely to be good as that has been the trend since late last year and the recent economic data out of the U.S. is pointing to a rise in jobs. On the other side of the coin the trade balance is likely to have widened as although the U.S. is growing it is not producing enough growth to reduce its trade balance.
We expect the Dollar to strengthen on the back of a good non-farm payroll figure and it is likely to strengthen more against Sterling then the Euro. If you are selling Sterling I would look to secure your deals before 13.00 and if you are selling Dollars look to take advantage of any volatility after the figure is announced.
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