Aussie dollar and Euro rip higher overnight as US dollars dips

Quick Recap

One thing is clear after overnight news.

That is if Greece truly does do a deal a lot of subterranean angst about the EU and Europe generally will dissipate and the Euro is likely to rally further. Certainly the news that the ECB, IMF, and EU Group have put a deal to Greece is good news. Now it’s up to the Greek government and PM Tsipras.

This news clearly caught forex traders short given it rallied 2% to the mid 1.1150 region. I wasn’t short because it was inside the range we talked about yesterday morning but I wasn’t expecting the rally either. So I got a little bit blind-sided.

Not on the Aussie though as the trade and setup was long. The high blew through the 0.7745 expectation after our initial 0.77 target was hit.

Elsewhere the bond rout – possibly the most important macro move in glaobl markets – relaunched itself with German 10 year Bunds selling off 18 points to 0.72%. That is a massive move and came as much as a result of the 0.9% print for EU inflation in May (expected 0.7%) as it did as a result of Greece.

In the end stocks in the US and core Europe were lower and while Australian futures were a little higher overnight, pointing the ASX higher today, I’ve written up an article showing two charts which show how expensive Australian stocks are.

On commodity markets gold is up a little at $1,192, Nymex crude is sharply higher at $61,26. Ostensibly it seems that oil is up on the USD drop, which makes it interesting that gold is so out of favour. Dalian iron ore for September delivery remains strong at 440.5.

On the day

On the data front today we get Q1 GDP in Australia. There has been some upward revisions to expectations after the partials were in, so it will be an interesting release. Here’s a 10 second guide to the data written by my colleague David Scutt over at Business Insider.

Also out are services PMIs in Australia and around the globe. This is a better measure of the health of the global economy,at least in developed countries. The ECB has a policy decision and in the US we get ADP payrolls in the lead up to Friday’s non-farms and also US trade.

Here’s the overnight scoreboard (7.43am AEST):

• Dow Jones down 0.16% to 18,011
• Nasdaq down 0.13% to 5,076
• S&P 500 down 0.1% to 2,109
• London (FTSE 100) down 0.36% to 6,928
• Frankfurt (DAX) down 0.94% to 11,328
• Paris (CAC) down 0.41% to 5,004
• Tokyo (Nikkei) down 20 points to 20543
• Shanghai (composite) up another 1.72% to 4,911
• Hong Kong (Hang Seng) down 0.47% to 27,466
• ASX Futures Overnight (SPI June) +18 to 5,638
• US 10 Year Bond +8 to 2.26%
• Australian 10 year bond +11 to 2.87%
• AUDUSD: 0.7771
• EURUSD: 1.1152
• USDJPY: 124.08
• GBPUSD: 1.5340
• USDCAD: 1.2405
• Crude: $61.26
• Gold: $1,192
• Dalian Iron Ore (September): 440

CHART OF THE DAY: AUDUSD 4 hour

Given that the rally has been so strong in such a short period of time and given we have the release of Australian Q1 GDP today it’s no wonder that the Aussie has pulled back from the high.  It’s overcooked on the 4 hour charts as well.

So the next catalyst will be the data.

I’m expecting some sort of pullback toward 0.7720/40 and then likely another pulse higher.