Article / 12 June 2015 at 7:01 GMT

Morning Markets: Calling Greece's bluff

Former managing editor, TradingFloor.com / Saxo Bank
Denmark

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Watchlist

  • Japan revised industrial production (0430 GMT, already published)
  • Spanish CPI (0700 GMT)
  • EU industrial production (0900 GMT)
  • US PPI (1230 GMT)
  • Uni of Michigan survey consumers (1400 GMT)

The niceties of the diplomatic circuit were summarily ditched overnight after Greek prime minister Alexis Tsipras was told in no uncertain terms by European president Donald Tusk that it has to stop fighting creditors' demands and sign a default-swerving deal to stave off a potential euro exit. The IMF grabbed its ball and left leaving no-one in doubt as to its position.

EURUSD was sliding into the morning session but still keeping its head above the 1.1200 mark. Any further damaging news out of Greece could see further slippage, notwithstanding an important EU industrial production print today. A relatively dollar-positive monthly US retail report yesterday after four of the previous five had missed has not had much impact but might boost expectations for a September rate hike.

Core bonds picked up some of the slack with German bunds ending four consecutive days of decline while US 10-year Treasuries held firm. Asian stocks were on the rise with the Shanghai Composite Index up 2.8% for the week with bonds through the region also on the rise as the outlook for a potential rate cut in September by the US Federal Reserve firmed. Expect stocks to rise again if speculation that the PBoC might take further stimulus action this weekend is borne out.

HSBC meanwhile fell 1% on the FTSE after it announced a global plan to cut 25,000 jobs, 8,000 of them in the UK. Although clearly a blow to prestige, GBP has held steady going into the European session.

Market signals

Asian session

  • Hong Kong house prices rose the fastest of any country over the 12 months to March
  • New lending to Australian business has risen to a nine-month high
  • Rio Tinto will seek to raise $1.2 billion in a 10-year fixed rate issue
  • Shanghai Composite Index up 0.6% on the day

Forex ahead

  • EURUSD straddles have a mid. of 11.2%, coming off significantly from Thursday

  • Straddle remains high as the market waits on Greece

  • One-month USDJPY volatility moved sharply to the left in New York trading yesterday

  • Vols down to 9.15% from 10.3% in the pair

  • AUDNZD volatility coming off after RBNZ rate decision.

From the Floor

Walk-out. "It looks like the IMF has decided to call Greece's bluff," says Boye.

Return to go. "There was yet another failed attempt at $62/b yesterday for WTI in this ongoing yo-yo effect," says Hansen

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

1..2..3
While US producer prices show no sign of inflation, the Fed still looks like it will hike rates in September, no matter what, says Juhani Huopainen.

Ruffled feathers
Bank of Japan chief Haruhiko Kuroda may have ruffled political feathers with his comments on JPY strength, but he was correct to do so, says Max McKegg.

Bounce back
EURUSD may have started the European day in tepid fashion but there is good reason for an intraday rebound towards and potentially past 1.1300, says Alan Collins [trade view]

Talking the talk
Being able to speak English in China is a huge advantage and the latest P2P English apps are a cost-effective way to achieve proficiency, explains Neil Flynn

Don't blink
The markets have become very complacent on the threat of a rate hike, but it is coming in both the UK and US and maybe sooner than we think, writes Neil Staines

Mercury rising
We're headed for a difficult end to 2015 with those bond yields only going one way. And isn't it about time we dropped the inflation comparisons with the 1930s, asks Steen Jakobsen

Kiwi pummelled
NZDUSD was annihilated after the RBNZ cut interest rates by 25 basis points and any thoughts that this is just a temporary phenomenon should be dismissed, warns John J Hardy [video]

Package that
US packaging material supplier MeadWestvaco could be coiling up for a medium-term rise on the back of a stock market correction. Ali Taghikhan explains why [trade view]

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 It's all too easy to draw comparisons with the 1930s, but they don't help. Photo: iStock

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