On Friday players were waiting for positive in decision on Greek issue until the last moment. It restrained sales of euro. Still, the positive didn’t appear. There is a hope for success of negotiations scheduled for weekend. As a result, dollar’s strengthening was limited. The spring was compressed just to stretch sharply.
This week will be short (on the 3rd July most markets don’t work in the U.S.A. due to celebration of Independence Day on the 4th July), but with interesting prospects. First of all, Greek situation has reached the decisive stage. Last Saturday’s negotiations came to nothing, parties failed to reach a compromise. Prime Minister Tsipras preferred not to take responsibility and decided to bring the issue of agreement with international creditors to the referendum. It provoked some panic in Greece – money withdrawal from accounts has accelerated in Greek banks, even members of Greek parliament couldn’t avoid such moods. In order to avoid panic with mass withdrawal of money, Greek banks are closed for vacations until the 6th of July, capital flow control in introduced. Tsipras’ decision caused dissatisfaction among creditors – the IMF has claimed that as before it expects payment of regular tranche on June 30th by Greece, and Eurogroup rejects to extend assistance program till signing of a new agreement. At the same time, there is positive news, though it is too weak in current situation – the ECB still retains the ceiling of crediting volumes of Greek banks, all express an amicable desire to leave Greece in the Eurozone. Such development of events provoked sharp collapse of euro at the opening of the market today. Now markets will monitor public opinion polls concerning the issue which was brought to the referendum.
Herewith economic background will be rich this week. In the Eurozone it is preliminary data on inflation, retail sales and unemployment and final data on PMI. Still, they are overshadowed by debt crisis and can have only short-term influence. American statistics will be the other attraction pole this week. As usual, at the beginning of the month we will see the report on labor market. Forecasts are still positive, but recent doubts of the Fed head Janet Yellen about stability of employment growth won’t allow to relax. This week short-term expectations are in favor of dollar largely due to the situation in Greece.
Today preliminary data on inflation in Germany and incomplete deals on houses sales in the U.S.A. are of most interest. In both cases the forecast is negative for euro. Risks of renewed development of deflation processes have increased and last reports on housing market showed signs of recovery of this sector. Taking into account Greek factor, dollar has reasons to continue strengthening against euro during today. One more beneficiary is Japanese yen, which is growing on players’ desire to avoid risks.
In current market situation there is only one recommendation – to keep euro’s sales. The pair broke through all short-term supports immediately, if 1.0950 doesn’t resist, then the question of testing of annual minimums will appear. We retain our short position from 1.1200, stop is set at the entry point.
Any opinions, advice, news, research, analyses, prices or any other information presented on this webpage is provided as general market commentary and does not constitute investment advice. "Vector Securities" shall not be liable for any loss, including loss of profit, which may arise directly or indirectly from the use of this information.