Waiting

With the US Independence holiday and the impending Greek referendum on Sunday, today is likely to be a day of relative subdued trading in FX markets and elsewhere. Yesterday’s US employment report set the tone for a softer dollar. Even though the unemployment rate moved lower and down to 5.3%, the combination of a softer headline jobs numbers and downward revisions to prior months it wasn’t the backdrop that served to seal the deal on a September rate increase from the Federal reserve. Interest rate markets have further reduced the probability of a September move, with the pricing around 25% chance according to Fed Fund futures.

On the data calendar, there is just final PMI data for the Eurozone released this morning, together with services data in the UK. We’ve seen Chinese stocks fall further overnight; no great surprise with that given the recent price action. That has impacted on the Aussie to a degree, with AUDNZD back to 1.13 having failed to push above the 1.14 level yesterday. The yen remains the real winner from the week so far, with the Kiwi taking the other side, given expectations for a further easing from the RNBZ later this month. As for Sunday, the feeling is the risks are skewed to the downside for the single currency. A rejection of the proposals would put Greece on course for an exit from the single currency. An acceptance would open up the doors for negotiation, but we have to remember that the proposal is also effectively null and void in itself, so it would be back to the drawing board.

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