Article / 05 June 2015 at 8:00 GMT

From the Floor: Situation critical

Head of Editorial Content / Saxo Bank
Editor’s note: From the Floor takes advantage of's unique real-time access to Saxo Bank’s various trading desks around the globe to put our community in touch with the developments that matter to their portfolios.

  • Asian session volatility "contained by lack of data": Moltke-Leth
  • Shanghai Composite gives up gains after opening north of 5,000
  • "The situation is still very critical in Greece": Fasdal
  • Bond markets consolidate, but NFP remains a key event risk
  • FX Options "adding great value in this environment": Larsen

By Michael McKenna

A lack of economic data ahead of today's hotly awaited US nonfarm payrolls report left the Asian session fairly muted, says Saxo Bank's Christopher Moltke-Leth, but there were still a few subterranean rumbles.

One such tremor occurred in the EURUSD, which remains highly vulnerable to the status of debt talks between Athens and its creditors. According to Moltke-Leth, the pair fell by as much as 60 pips in the early Asian session after the Greek finance ministry announced that its creditors' latest proposal could not be the basis of a deal.

(While From the Floor has always admired that very Mediterranean sort of intransigence, there is still our portfolio to consider...)

In any case, the announcement and the not-unrelated lack of a deal have dashed the hopes of many investors who were confidently saying things like "just needs a signature" earlier this week. 

"The Greek situation is still critical," says Saxo Bank's head of fixed income trading Simon Fasdal, adding that while a "Grexident" is out of the question so long as talks continue, frustration with the delays could see Greece's creditors issue a final ultimatum... and who knows where things would go from there?

In fact, the Bundesbank's Andreas Dombret matched the Greek finance ministry's words with a few of his own, stating that a Grexit "would be manageable". 

It's all getting a bit "a Greek and a German walk into a bar...", but the punchline could send shockwaves through the world economy.

All of these pressures, quakes and tiresome waits have, however, created opportunity in the FX Options space, says trader Dan Larsen from Saxo Bank's Copenhagen trading floor. "FX Options are adding great value in this environment", he notes, adding that investors should look to protect themselves through options given the event risks that lie ahead.

Looking to the numbers, Simon Fasdal tells us that Greek yield curves remain illustrative of the situation's gravity and are trading sideways at present (like so many Greek assets).

Greek yields
Greek bond yields, just like the rest of us, are waiting for things 
to settle one way or the other. Source: Saxo Bank, Bloomberg

The Greek situation, however, is not the only elephant in the room today as the thundering behemoth that is the US nonfarm payrolls report is also throwing its weight around Saxo Bank's Copenhagen trading floor ahead of its 1230 GMT release.

Saxo Bank head of macro strategy Mads Koefoed is calling for a slightly below consensus print of 218,000 new jobs but as usual, we won't know until the numbers come out. One FX pair that may prove interesting to watch in the wake of the NFP print is the USDJPY, which is currently finding minor support at 123.50.

"[At the moment], 122.00 is the real line in the sand", says the FX Options desk's Dan Larsen, "but USDJPY could really surge on a strong payrolls figure".

Another asset class that could be impacted by a strong NFP print is of course bonds, where the global selloff is currently consolidating (German bund yields have retraced back to 0.83% from just under 1%) but remains far from over.

"It's a mixed kind of risk-off right now", says Fasdal, noting that rising inflation, the European Central Bank's do-nothing stance on fixed income assets and even the renewed instability in Ukraine are all factors (along, of course, with you-know-who and its creditors) in the current bout of bond woes.

All of this is to say, of course, that the fixed income market remains vulnerable and a robust NFP print, along with all of the "hawk talk" on rates that would ensue, could see the selloff resume in earnest.

Is it too soon to begin looking at flights to the South Aegean?

Greek island
It might be cheap, but is it cheerful? We need a break. Photo: iStock

Michael McKenna is a consulting editor at

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