Both the euro and market sentiment in general have been on a 24 hour rollercoaster ride after panic materialized over whether the Greek bailout would be abandoned. The first alarm bell sounded when EU leaders called off today’s planned Eurogroup meeting; a move that was officially attributed to paperwork not being ready, but was unofficially seen as a sign that EU leaders are losing faith in the Greek government’s policy continuity and ability to adhere to terms of a bailout after the next Greek elections. This latter theory was catalyzed by German Finance Minister Schaeuble talking openly about contingency plans in case Greece exited the Eurozone. In response to these developments EURUSD sold off to lows of 1.3080, forcing Greece’s government to submit a hastily composed pledge to maintain policy even after the next elections. Since that point, EURUSD has recovered towards 1.3200 but the cancelled Eurogroup meeting has not been reinstated – replaced instead by a conference call. Also helping the recovery of risk appetite has been the news that China is willing to play a greater role in helping with the European crisis. Chinese central bank governor Zhou said that China would continue to invest in sovereign bonds and stated his desire for the euro to become a more important reserve currency.
During the Asian session, equity markets have had a strong showing with the Nikkei up +2.3%, Hang Seng +2.2% and Shanghai Composite +0.9%. Gold is edging back higher to $1730 levels, in yet another sign that the correlation between gold and risk aversion has broken down completely.
Coming up in today’s session we have a busy schedule of economic releases, especially for the UK. First up will be the release of the UK ILO unemployment rate (expected to stay at 8.4%), and claimant count, followed by the release of the latest Bank of England Inflation Report. Yesterday, UK CPI dropped to 3.6% YoY from 4.2% in the month prior – a result that fits with the BoE’s long-held view that CPI will continue to drop sharply to below the 2% target. The other major release today will be the Eurozone Q4 GDP figures (expected: -0.4% QoQ, 0.7% YoY), followed by the US Empire manufacturing survey, and long-term TIC flow data.
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During the Asian session, equity markets have had a strong showing with the Nikkei up +2.3%, Hang Seng +2.2% and Shanghai Composite +0.9%. Gold is edging back higher to $1730 levels, in yet another sign that the correlation between gold and risk aversion has broken down completely.
Coming up in today’s session we have a busy schedule of economic releases, especially for the UK. First up will be the release of the UK ILO unemployment rate (expected to stay at 8.4%), and claimant count, followed by the release of the latest Bank of England Inflation Report. Yesterday, UK CPI dropped to 3.6% YoY from 4.2% in the month prior – a result that fits with the BoE’s long-held view that CPI will continue to drop sharply to below the 2% target. The other major release today will be the Eurozone Q4 GDP figures (expected: -0.4% QoQ, 0.7% YoY), followed by the US Empire manufacturing survey, and long-term TIC flow data.
By
M.Zohaib Gadit
Forex Trading Consultant
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