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    The Day Ahead - Tuesday 7th July 2015

    In a not overly surprising turn of events, Yanis Varoufakis left his position as Finance Minister of Greece having resigned, although the tone was clear in his announcement that while he may have officially resigned, he was given a rather strong nudge towards the door.

    In the build-up to the referendum, Varoufakis labelled his European counterparts as terrorists, which appeared a strange negotiating tactic, and his outspoken stance seems to have been the reason for his demise. Euclides Tsakalotos, the newly sworn in minister has been heavily involved in bailout negotiations to this point.

    Whilst leaders are saying the door remains open for Greece to get a bailout and remain in the Eurozone, the frustrations remain obvious. Greek banks are reportedly days away from collapse without assistance and ahead of the upcoming Eurogroup meetings, the new minister is extending capital controls, meaning banks will now stay shut until at least Thursday whilst ATM limits remain at EUR60 per day.

    In a move similar to the preceding Monday, the Euro had gapped lower to start the week around 100 pips below the Friday close, but made recoveries throughout the day. EURUSD finished the day at 1.1054 – only 17 pips below Friday’s closing level.

    The Aussie dollar, treated as a risky hold as it often is in times of uncertainty, had gapped at the start of the week to 0.7461 and despite a slight recovery over the day still remains below 75 cents, a level not previously seen since May 2009, when the currency was on a steep climb back from around 62 cents against the US dollar. The trend looks set to continue lower, although at this stage moving towards 60 cents seems a little far-fetched.

    Big news for the Aussie today is the cash rate decision at 07:30 GMT 3 (2.30pm local) and whilst there is almost zero chance of a rate cut from the 2% level, all eyes will be on the statement that accompanies the decision. Traders will be keen to dig further into that to decide what the direction for the currency is over the next month at least.

    Aside from the Eurogroup meetings, there are other significant releases out today. British monthly manufacturing production is due at 11:30, forecast for a change of 0.1% against last month’s -0.4% disappointment.

    15:30 sees the release of Trade Balance figures in both Canada and the US. Having been better than the forecast in the US last month, those with a keen eye on news which reflects on the broader economy will be looking for further improvement. The forecast however is for -42.5B, down from -40.9B last month.

    In a few minutes at 01:00 we have NZIER Business Confidence in New Zealand. Having taken a pounding of late, Kiwi dollar holders will be hoping for some positive signs for the economy.


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