Greek uncertainty combined with poor data sends euro lower

Fundamental View

Yesterday saw some risk come back into the Greek situation with the rejection of the Greek proposals by their German counterparts: Schaeuble described the request for a loan extension a “Trojan Horse” designed to change the terms of the current Greek bailout. The initial rejection of the proposal sparked risk off across the majority of assets with stocks falling from record highs in the S&P and the DAX to where they began the day’s move. This risk has since been temporarily abated with the Germans requesting another request for an agreement, this time in the form of a short, three-sentence letter. We also had news from Merkel and Tsipras implying that talks were back on the table; Economy minister Gabriel entered the fray attempting to defuse the situation and advising further talks and more time to consider all options would be preferred. The uncertainty has been highlighted in the currency space this morning as we have seen risk-off against the Euro, seemingly instigated by poor headline data from France, Germany and the Eurozone as a whole; with the poor data acting as a catalyst and the underlying tones of potential Grexit risk it is understandable that the majority of trades today will follow the risk-off sentiment. Crude Oil inventories reported lower than the market had expected yesterday. The majority of market participants had expected, due to a record build in API numbers on Wednesday night, the DOE number to far exceed the expected reading of 3 million barrels. As the actual figure merely doubled the estimate we saw a push higher to price in the new fair value. 

Today’s View

Today we saw UK Retail sales miss across the board, the monthly headline figure printing a reading of - 0.7% against the expected -0.3%. The annual ex-autos number was similarly bearish but by a greater margin printing lower at 5.4% against the expected 5.9%. This represents an interesting fall in consumer confidence over the medium term, repeated payments for products such as cars purchased on finance are slightly lower on the consumers’ radars due to uncertainty of interest rate rises in the UK. We have had continued commentary regarding the Greek situation and have seen both Greek and German spokespersons providing stabilising comments regarding talks held throughout the morning; this has resulted in a lift in European bourses. 

Alternative view

The main event for the day is the Eurogroup meeting at 2pm today; the rest of the calendar day is relatively quiet so traders are encouraged to remain vigilant for any comments from the parties involved in these discussions but also to limit their market exposure during quiet periods.