Greece default worries still weigh on euro

Good Morning,

- Greece default worries still weigh on euro…

- Global Equity markets keeps a positive mood after China took steps to stimulate its economy and Wall Street also rose on corporate earnings.

- The European Central Bank is studying measures to rein in Emergency Liquidity Assistance to Greek banks, as resistance to further aiding the country’s stricken lenders grows in the Governing Council, people with knowledge of the discussions said. ECB staff have produced a proposal to increase the haircuts banks take on the collateral they post when borrowing from the Bank of Greece.

- ECB’s Vice President Vitor Constancio said Greece might not have to leave the euro even if it defaults on its debt. “We are convinced in the ECB that there will be no Greek exit,” Constancio said at the European parliament in Brussels on Monday. “The Treaty does not foresee that a country can be formally, legally expelled from the euro. So, if anything, some choice of that nature would have to be taken by the Greek government, not by us.” The ECB is supporting Greek lenders, and by extension the economy, with emergency liquidity as concern over the government’s negotiating tactics for international aid payments spark deposit outflows. In a sign of the severity of the crisis, the government has issued a decree that forces local governments to transfer cash balances to the central bank.

- The dollar rose as the euro was stung by gathering concerns that Greece could default on its debt or leave the single currency within next weeks.

- UBS on USD: "We expect consolidation in the dollar to continue in the near term, with USD performance showing greater dispersion than before. This is opening up opportunities to be long G10 currencies outside of the USD. USD positions should be chosen more selectively, and concentrated against currencies from countries where idiosyncratic factors can drive FX weakness," UBS advises. In particular, UBS thinks long USD positions should be focused against currencies where central banks are likely to ease policy by cutting rates or by targeting the currency directly. In particular, UBS remains bullish USD/JPY, and thinks it is the best expression of a bullish USD view in the G10 space. "Although there is room for some further modest downside in EUR/USD in the nearterm, we don’t think risk-reward is especially compelling in either direction," UBS argues. "Our longer-term forecast for EUR/USD is more constructive than most, with year-end 2017 at 1.15. This view is based on a combination of long-term valuation models, and our view of the cyclical path that delivers us from current levels to the long term," UBS projects. Near-term, UBS targets EUR/USD at 1.06 in one month and 1.04 in 3 months.

- Telegraph.uk : The vast majority of finance workers would vote for the UK to remain part of the European Union even though more than 40pc believe that Brussels is actively hostile towards their industry, according to a new survey that lays bare the City of London’s ambiguous relationship with Europe. Nearly three-quarters (73pc) of respondents said they would either “definitely” or “probably” vote to stay in the EU.

- RBA Minutes: Members noted that growth of Australia's major trading partners had continued at around its average pace in early 2015. Growth in China looked to have eased a little further and this was likely to have contributed to further declines in iron ore and coal prices. Globally, the fall in oil prices in the second half of 2014 had led to lower inflation and was expected to provide additional support to demand in Australia's trading partners. Monetary policies remained very accommodative. In China, the authorities had announced a target for GDP growth in 2015 of 7 per cent, ½ percentage point below the target for 2014. Members also noted that the Australian dollar had recorded an all-time low against the New Zealand dollar.

- Oil prices slightly rose in volatile trading as a from Saudi Arabia's Interior Ministry about possible attacks on energy installations there offset earlier comments indicating Saudi production would stay near record levels in April.

- Watch today: German confidence, Eurozone sentiment, US Redbook.

Have a nice Day!