Greek debt saga dominates currency markets

Australian Dollar:

The Australian dollar recouped losses suffered in early trade as investors looked to square positions and adjusted their U.S interest rate expectations. Plunging to touch 0.7580 on open the AUD edge steadily higher throughout the day as the unfolding Greek debt saga forced markets to reassess the outlook on macroeconomic policy. Fears the crisis will spread dampening global demand and consequently creating a drag on U.S economic growth through a manipulation in balance of trade has induced a shift in expectations with just 35% of analyst anticipating a September rate adjustment as most traders extend their macroeconomic outlook into December. With little domestic data on hand today we expect the AUD will remain stretched on runs above 0.77 with support firmly placed on pushes below 0.76.

• We expect a range today of 0.7530 – 0.7720

New Zealand Dollar:

Much like its antipodean counterpart the Kiwi managed to recoup losses suffered throughout early trade. Having broken through 5 year lows touching 0.6789 the NZD bounced higher as investors sold down the USD amid fears the Greek debt crisis will spread dampening global demand and stifling US GDP expansion prospects. Touching intraday highs of 0.6881 the NZD opens this morning buying 0.6839 U.S cents as attentions turn to ANZ business confidence for domestic direction while the ongoing Greek debt saga continues to drive currency direction.

• We expect a range today of 0.6750 – 0.6920

Great British Pound:

The Great British Pound edged marginally higher against its US counterpart Friday as investors pushed back U.S interest rate expectations amid fears the ongoing Greek debt crisis will dampen US economic growth prospects. Despite widespread concern surrounding the long-term integrity of the Euro Sterling lost over 300 points through trade on Monday as investors looked to the block unit in funding the purchase of safe haven German Bunds and adjusted/squared short positions. Attentions now turn to today’s current account balance report for further direction amid widespread economic uncertainty.

• We expect a range today of 2.0325 – 2.0650

Majors:

The ongoing Greek debt saga continued to plague the single currency through trade on Monday as officials confirmed Greece will default on today’s 1.6 billion euro IMF repayment obligation. Week long capital controls saw stock markets spiral downward while the 19 nation block unit plunged against most major counterparts touching intraday lows of 1.0956. As the initial panic eased traders looked to square position and while the Franc and Yen benefited from haven plays investors turned to the Euro in funding German Bund purchases. The move into bonds as a safe haven risk off strategy proves there is still demand for European assets helping reverse the euro’s downward trajectory and forced the unit back above 1.12 into the session close. The Greenback’s dollar index moved lower as investors and markets pushed back interest rate expectations amid ongoing European developments. The threat of contagion and a drag on global demand dampening the US economic outlook saw investors revise bets with just 35% of traders expecting the Fed to raise the benchmark cash rate in September. Attentions remain squarely fixed on Greece and its creditors while markets look to Non-Farm payroll numbers Thursday as the big ticket macroeconomic item for the week ahead.

Data releases:

• AUD: Governor Steven Speaks,Private Sector Credit and HIA New Home Sales
• NZD: Building Consents and ANZ Business Confidence
• JPY: Average Cash Earnings and Housing Starts
• GBP: Current Account Balance, MPC Member Haldane Speaks, Final GDP, Revised Business Investment and Index of Services
• EUR: CPI flash Estimates, Core CPI Estimates, Unemployment Rate, Italian Prelim CPI and Italian 10 Year Bond Auction.
• USD: Chicago PMI and CB Consumer Confidence