It is a massively important week for the Hellenic state as lawmakers vote on the austerity measures that have to be passed for Greece to receive further international aid to the sum of 12 billion Eur. There have been rumours that up to four deputies in the Government are wavering in their support for the austerity package measures. However, I believe the austerity measures will be approved this week for the simple reason that the EU won’t allow the banking sector to be dragged into the mire along with Greece. The main stumbling block in negotiations so far has been with private sector involvement. Reports over the weekendseem to suggest that progress has been made.
French and German Governments have been in talks with major stakeholders in the financial sector with reports indicating that BNP Paribas and Deutsche Bank have agreed to a ‘rollover’ of their debt meaning they’ll rollover circa 50% of their debt effectively cutting their exposure but commit to Greece for the long term with the purchase of perhaps up to 30 year bonds. The news flow from various publications is varied at best and a lot of it is opinion and rumour rather than fact. Until we have firm facts out this week it is all speculation.
The Euro has fallen to a record low against the Swiss Franc in this morning’s trading and has also extended its losses against the dollar on whether austerity measures will be passed. I’m still bearish on the Euro. I think we’ll see the EUR/USD pair continue to drift lower as I don’t think any long term solvency issues are or will be resolved, if risk aversion comes back into play and the FED ends quantitative easing that’ll push the Euro lower and finally I’m not so sure if the issue of private sector bondholders involvement has been agreed, contrary to weekend reports.
It is a very thin day in terms of data with the only releases out of the US being Personal income (MoM) May and out of Japan we have Retail trade (YoY) (May) and Large retailers sales (May).
GBP/EUR has been largely unchanged since Friday’s close of trading with it settling into a range. GBP may be a benefactor in today’s trading with the EUR/USD pair pushing lower however. Cable has again followed the EUR/USD downwards move. If you’re a seller of USD now may be an opportune time to hedge some of your exposure back into GBP or Euro’s.
The markets focus for this week will be Greece and not much else. Expect a lot of intraday moves however I see the Euro pushing lower in trading. On June 29th and 30th, dependent on announcements, we could see the Euro gain impetus from the outcome of the Greek talks and the implementation of austerity measures. Sterling will largely be dictated by Euro and USD moves this week however an important figure for the pound this week is released tomorrow in the form of GDP (QoQ) Q1. This is released at 09.30am UK time. The expected figure is 0.5%.
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