EURUSD falls below 1.10 following warning from Greece

Currency Markets

The warning over the weekend from Greece that it will not be able to afford its IMF repayment in just under a fortnight has provided the markets with a reminder about how delicate a situation Greece finds itself in with its creditors, while also installing further bearish pressure on the Euro currency. There is no doubting that Greece has become a frequent reoccurring risk to investor sentiment in recent months, and there is potential for investor sentiment towards the Euro to be pulled down even further by the news that anti-austerity parties were declared victorious in several local elections in Spain. This might be a long-term risk, but there is the potential for such parties to become prominent figures in Spanish politics and we might even see an anti-austerity government in the future.

Moving back to Greece, the major problem with the ongoing five-month negotiations is that they have largely failed to present anything tangible. To be honest the only positive to come out of these negotiations is words of encouragement that a deal could be close, but in the past these have then been contradicted by contrasting statements just a few days later. This has occurred once again with optimism being raised last week that a deal would be reached “within a week”, and it’s possible that the comments about Greece not being able to make its next repayment to the IMF could be seen a way to move the deal along. If Greece is unable to meet its repayment in just under a fortnight, the country will essentially default and this means that the pressure on creditors to reach a new agreement with the Syriza government will intensify.

Commodities

Gold is continuing to range quietly between $1215 and $1200, but I am expecting volatility in the metal to increase later in the week with some higher-risk US economic data released over the upcoming days. Janet Yellen repeating the Federal Reserve’s ongoing commitment to raising US interest rates at some point this year has underpinned bearish pressure on the metal, but Gold bulls can still exploit any indications that the Federal Reserve will maintain a hesitant and cautious stance towards raising rates. Fragilities in the US economy are being frequently exposed, and if Tuesday’s Durable Goods and Consumer Confidence concerns investors, interest rate expectations will be at risk and interest in Gold will likely return as a result.

After appreciating by over $2 and rising back above $60 following another reduced trade surplus being learnt from the US weekly inventory reports, WTI Oil has slipped back below $60 to $59.34. While we are now noticing a strong correlation between declining US oil rigs and reduced trade surpluses in the weekly inventory reports, the oversupply in the markets is still too high with this preventing the bulls from pushing the price of WTI any higher. I personally believe that the price of WTI is stabilizing between $58 and $62 in the near-term, and I am also keeping an eye on investment in oil production increasing in the Middle East.

The news around investment in oil production increasing in the Middle East is an interesting one, mainly because it could be seen as an attempt from OPEC to regain market share and keep the price of WTI lower for longer. The price of WTI being kept lower from longer would also squeeze out US oil producers, which would also reduce these constant concerns about there being an oversupply in the markets.