Euro trade on defense mode above $1.09 level

Good Morning,

- Euro trade on defense mode above $1.09 level, after drops at $1.0863 lows yesterday.

- Japan's Nikkei share average edged up in choppy trade on Wednesday, extending its gains into a ninth day, but gains were limited as Dow and S&P both lost 1 percent last night on Greek debt concerns and after upbeat U.S. economic data added fuel to expectations that the Fed will raise rates sooner rather than later.

- Developments in the consumer mood in Germany have not been uniform again in May. The German consumer climate is increasing slightly. Following a value of 10.1 points in May 2015, the overall indicator is forecasting 10.2 points for June. Economic expectations and willingness to buy increased somewhat, while the income expectations declined moderately.

- When the world’s top finance ministers and central-bank chiefs meet in Dresden this week, they may struggle to stick to an agenda set by their German hosts that doesn’t mention Greece. The Group of Seven meeting starting on Wednesday will officially focus on big-picture themes of economic growth, tax evasion and strengthening the global financial architecture. Yet the most pressing matter for many of the policy makers attending is whether Greece can stay in the euro, and whether the world can handle the consequences if it can’t. Time is running out for the Mediterranean country to reach agreement with its German-led creditors over economic reforms needed to unlock bailout funds before loans from the International Monetary Fund come due next month. That’s leading non-European observers, like officials from the U.S. Treasury, to warn of unpredictable consequences if Greece and its partners don’t manage to avert a default.

-Credit Agricole on EUR/USD: The pair seems poised to extend its slide as fears about Greek default linger ahead of next week’s IMF payment. We have long argued that the future of the troubled Eurozone member state should continue to haunt the single currency. With the negotiations between Athens and its creditors expected to resume today, more indications that a deal remains elusive should undermine the EUR. In addition, the surprisingly strong showing of the anti-austerity Podemos party at the Spanish local elections over the weekend could add to EUR-gloom. In particular, evidence that contagion from Greece is starting to erode investor demand for EUR-denominated assets should weigh on the single currency. Even in the event of more positive news flow, we anticipate only limited EUR upside risk, as the focus will quickly turn back to the ECB’s dovish policy stance. We remain short EURUSD in our portfolio. CA maintains a short EUR/USD on Friday from 1.1385 targeting a move to 1.0800, with a stop at 1.1680.

- Last Economical data yesterday showed U.S. business spending plans increased, consumer confidence improved and house prices extended gains. The data supported the stance taken by Fed’s Chair Janet Yellen, who said on Friday that the central bank could hike rates this year if the economy keeps improving.

- Fed’s Lacker: June a good time to consider hikes, but undecided just yet.

- Iwata says current rises in Japanese stock prices reflect record company profits. Sees no sign of financial imbalances brewing in Japan, quality of assets, not just quantity, is important in maximizing effect of BOJs stimulus programme, BOJ will adjust policy as needed.

- Crude oil rose, to recover ground from sharp drops in the previous session, boosted by expectations that U.S. crude stocks could fall for a fourth straight week. Prices were also supported by comments from western diplomats that a nuclear deal with Iran was unlikely by a June 30 deadline and that the oil producer would not get sanctions relief before the end of the year in the best of cases.

Have a nice Day!