With Greece's deadline approaching, Grexit risks remain highlighted

Fundamental View

Greece’s deadline is fast approaching. Cabinet ministers have stated that an extension of the current bailout will be sought after, with terms within the framework of the Moscovici plan. Overnight comments from Varoufakis have, however, given the situation some hope and many participants are awaiting news of the contents of the revisions to terms. Interesting areas of the terms include taxpayers repaying their debts, with the Greek parliament suggesting monthly repayments in a bid to stave off pressure from Germany and Eurogroup Grecosceptics. One of the main issues highlighted by the potential exit of Greece from the Eurozone is contagion risk. Many market participants have been pricing in short-term volatility ahead of the deadline but the majority of tumult from this is if similar complaints take hold on the back of the Greek precedent in other peripheral European nations. With both haven fixed income and gold trading on their lows it is clear to see that many are pricing out, or at least the removal of, near- term risk.

Today’s View

This morning saw the release of UK jobless figures including the Claimant Count and also Average Weekly Earnings. The headline Jobless Claims Change fell from the previous -29.7k to -38.6k; this resulted in a bullish move in the GBPUSD above the 1.5400 handle. This was assisted by an in-line Claimant Count rate at 2.5% and also a fall in the ILO Unemployment rate, with Average Weekly Earnings for the quarter up 2.1% ahead of the expectations. We also saw a revision to the previous number posting 1.8% which highlights real wage growth. GBUSD has since moved to test the week’s high at 1.5437 posted on the 16th EURUSD to fall back below the 1.1400 handle which we pushed above earlier in the session on the back of positive noises from the Grexit space. The support at 1.1400 which had held for the morning and over the UK data release was finally stripped out at 10am, the continuation lower was also fuelled by poor EU construction output for December with not only misses on the expected but also downward revisions to the previous figures. This afternoon we have a large amount of US data. Housing starts kicks off the data set with building permits, PPI Final Demand released simultaneously. Industrial production is due to be released ahead of cash open but the releases are likely to set the tone for the afternoon session ahead. Things to be aware of are Poroshenko’s comments due later today and also developments in the Greek exit space.