Fundamental View
Yesterday’s main fundamental driver was the Greek political upheaval; as political instability risk increased the Athens stock market took the largest plunge seen since the 1980s. This has huge negative implications as yesterday’s fall was larger than any single down-move during the Eurozone debt crisis in recent years. The risk was triggered by the calling of a Greek presidential snap election, amplified by the recent down-move in crude oil and also the decline in China. The risk which market participants are pricing in here is that, if he lost it could open the door to snap general elections, elections which the opposition party, Syriza, is likely to win. Syriza are anti-EU and anti-Troika which would lead once again to Eurozone uncertainty. This saw short term yields ramp higher to 8.2%, reading higher than the Greek 10year and thus inverting the yield curve. This short term default risk also saw ESTOXX and the DAX make legs to the downside; US equities also followed the move lower before finding support and taking back the majority of losses during the Asian Session.Today’s View
This morning we have seen the negative sentiment abate slightly with both ESTOXX and DAX consolidating in a small range. The currency space has yielded the most movement with commentary from Bank of England’s Mark Carney stating that it is right to keep stimulus in the UK economy and also stressed once again that rate rises would be steady and slow-paced; this causes us to once again question whether the Bank of England can afford to keep a slow pace hike. Cable has broken to new lows on the session The data calendar today is fairly light with only MBA Mortgage Applications due at 12pm with no analysts’ expectations to trade off of. We do have Department of Energy Crude Inventories due at 1530pm. API Crude Oil Inventories read at a build of 4400k barrels overnight, implying that there is likely to be a glut in supply in the DoE reading this week. We will therefore be looking to take short positions in oil.Alternative View
Any developments in Greece are likely to impact both the stocks and the EURUSD. Positive Greek sentiment could provide a lift in equities and render our S&P Strategy invalid.
Recommended Content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.