Market Brief
FX markets remain focused on developments around the Greek negotiations. Last week markets traded on positive sentiment over a Greek debt package, however this week has started on a more negative tone. We stress that the situation is dynamic with no deal being inked despite intense decision over the weekend. While reform measures provided by the Greek government were well received by institutions and Eurozone members there remains a high level of skepticism over the ability of the Greek government enact these reforms. In the latest news the concept of a “timeout” (5-year hold on Greece EU membership) is no longer on offer while Brussels has now given Prime Minister Alexis Tsipras a 72-hours ultimatum to pass through parliament new austerity measures (earlier measures passed were now deemed not sufficient by Eurozone members) before discussion on €74bn aid package can begin. "The most important currency has been lost, and that is trust," German Chancellor Angela Merkel stated adding that a deal to support Greece would not be made "at all costs," she cautioned.
Overnight, forex markets were subdued as traders watched for any real development over Greece. EUR/USD traded higher to 1.1150 from 1.1090 while USD/JPY rallied to 122.75 from 121.90. Asia regional equity indices saw renewed risk appetite as the Shanghai Composite rallied 2.96% which help the Nikkei 225 gain 1.58% and Hang Seng 0.33%. S&P 500 futures are down slightly by 0.31%. U.S. 10-Year yields eased somewhat to 2.38% following the strong Friday rally. European 10y peripheral spreads are narrower at the start of the week.
China exports increased 2.8% y/y above consensus of 1.0% gain. Imports fell -6.7% but much better than the forecasted -16.2%. The trade surplus contracted but remained healthy at $46.5bn from $59.5bn in May. The good results were reflected in renewed optimism over the Chinese equity markets. New Zealand house sales rose 29.2%y/y to 7,426 in June following an rise of 21.6% in the prior month. While median house price rose 5.4%y/y, due primarily to a increase in Auckland. Elsewhere, NZ food prices increased 0.5%m/m in June following prior months 0.4% rise. NZD/USD reversed Fridays sell-off at 0.6700 ,rallying to 0.6750 in early European trading. Break above 0.6780 will lower risk of a resumption of downtrend and target 0.6885 resistance.
Currency Tech
EUR/USD
R 2: 1.1436
R 1: 1.1278
CURRENT: 1.1088
S 1: 1.0955
S 2: 1.0819
GBP/USD
R 2: 1.5930
R 1: 1.5803
CURRENT: 1.5408
S 1: 1.5171
S 2: 1.5089
USD/JPY
R 2: 125.86
R 1: 124.45
CURRENT: 121.86
S 1: 121.45
S 2: 120.64
USD/CHF
R 2: 0.9719
R 1: 0.9543
CURRENT: 0.9462
S 1: 0.9151
S 2: 0.9072