Greece takes the market by the throat. Herewith the market desperately hopes for compromise. Announced “no” at the referendum was followed by regular diving of euro downward, but then any attempts of sale were suppressed during the whole week. There was desperate bidding between Greeks and creditors, what influenced currencies’ movement – euro spent the whole week in a narrow range and only on Friday it went upward after messages that Greece had submitted a new plan of debt restructuring. Although the decision on Greece is still pending, but it is obvious that investors have put much at stake hoping that this country will stay in the Eurozone. Besides, for dollar the situation of start of monetary policy tightening is becoming more and more uncertain. Against the background of lack of signals of stable economic growth from the U.S.A., the Fed’s comments on this matter were quite contained, what puts some pressure on dollar. Investors can’t wait endlessly, they need certainty.
Naturally, this week special attention should be given to Greece. Show must go on. Last weekend negotiations within the frames of Eurogroup and heads of main countries of Eurozone and the head of EC were held in Brussels. The topic is the same. There were speculations that Germans were in a rage and required temporary exclusion of Greece from the Eurozone for 5 years. The Eurogroup made such recommendation as an option. Greeks saw that this blackmail didn’t work and suddenly started giving signals of its willingness to make concessions. Greek parliament voted for empowerment of the Cabinet of Ministers headed by Tsipras for signing an agreement with creditors on the basis of new reform proposals. The most ridiculous thing is that terms of an agreement can be tougher that those, which were at the referendum. So, there is a rhetorical question: what for was this soap opera? By the morning of Monday, during the negotiations, Merkel, Hollande, Tusk and Tsipras have formed a compromise plan to solve Greek debt issue. There are no details yet, the plan will be submitted for approval of leaders of Eurozone countries. The market has already reacted modestly to regular delay. Hope is still alive.
Let’s speak briefly about main events of this week, which are able to increase market’s activity, but excluding Greek issue. The ECB session is on the first place. Still, it won’t go without Greece. The main question is whether the regulator will retain support volumes of Greek banks. What concerns economic statistics from the Eurozone, there are ZEW report, inflation, industrial production and trade balance, which draw little attention now. They can only slightly strengthen or slow down euro’s movement depending on decision on Greece. This week the U.S.A. provides rich economic statistics – retail sales, inflation, industrial production, Beige book, capital flows, housing market. At this moment the main problem of US economy – the lack of stability, what prevents the Fed from making decision on monetary policy tightening. Probably, this uncertainty will remain. Still, even in case of positive data, too much depends on Greece and this factor can not work in the short term.
Against the background of strong uncertainty about decision on Greece, players often pay attention to local currencies, regaining local events on them and such reaction results in quite strong movements. This week it makes sense to pay attention to sessions of Central Banks of Japan and Canada. Changes aren’t expected here. Everything depends on accompanying comments. Besides, interesting economic reports will be published in the U.K. (inflation and unemployment) and Canada (inflation). Under lack of decision on Greece, currency traders won’t waste chance to speculate on something in the short term.
From our point of view, the situation in the market is absolutely sad. Greek issue brings discord in the analysis of market situation, so we find it difficult to work out any plan of trading. So, now we stay out of the market.
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.