Greece officially requested a three year bailout programme and committed to tax and pension reforms from next week. However, details will be outlined today and that suggests there remains room for disappointment. Nevertheless, we remain of the view that officials will find a compromise in order to prevent Greece’s exit from the Eurozone.
Although such an outcome would trigger EUR upside, we remain of the view that rallies should be sold. This is due to investors’ preference of using the single currency for funding investments in riskier assets such as equities and as the ECB is unlikely to turn less dovish anytime soon.
In Australia June employment data was released above expectations. This in turn supports expectations of stabilizing price developments to the benefit of investors’ central bank rate expectations. This in combination with stabilizing China-related sentiment has been keeping the AUD in demand.
In the short-term we do not expect further upside on the back of further improving risk sentiment. From a broader angle, however, rallies should still be sold as any tightening of monetary conditions on the back of a further appreciating currency is unlikely welcomed by the RBA.
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