Article / 13 July 2015 at 1:22 GMT

Singapore Morning Report: All roads lead to Big Wednesday

Sales Trader / Saxo Bank
  • Yellen says later this year the Fed will begin normalising monetary policy
  • Expect the USD to be supported until we get more data from Greece
  • Emerging market currencies rallied Friday, but most traders staying USD long

By Saxo Capital Markets Singapore

Economic Data of the Day (Singapore Time)

0750: JPY – PPI MoM June (Prev. 0.3%)
0750: JPY – PPI YoY June (Prev. -2.1%)
1200: MYR – Industrial Production YoY (Prev. 4.0%)
2030: CAD – Unemployment Rate (Prev. 6.8%)
2030: CAD – Net Change in Employment (Prev. 58.9k)


0100: Federal Reserve Bank of Kansas City President Esther George speaking on economy in Oklahoma

Overnight News

Eurozone finance ministers met on Sunday and asked Greece for a list of reforms to be executed before any bailout could be given. A deadline to pass some of them as law before Wednesday has been given. The list of conditions include:

  • VAT: Greece must streamline the VAT system
  • Tax: Greece must broaden the tax base
  • Pensions: The pension system must be made sustainable
  • Greece must adopt a code of civil procedure
  • Greece must safeguard legal independence for its statistic office, ELSTAT (ie. no spinning results)
  • Automatic spending cuts must be implemented in full
  • Banking system: Meet bank recovery and resolution directive
  • Privatisation of the electricity transmission grid
  • Non-performing loans must be dealt with
  • TAIPED, the privatisation body in charge of divulging national assets, must be guaranteed independence
  • The Greek administration must be de-politicised 
  • The Troika (the 'institutions') must return to Athens.

EU creditors want EUR50 billion in collateral of Greek assets set up in a Luxemburg-based company and Greece to fire the workers they hired in defiance of the previous bailout commitments before giving any new bailout.

 The EU wants to see grid privatisation as part of Greece's bailout conditions. Photo: iStock

Fed chair Janet Yellen said on Friday night: “I expect that it will be appropriate at some point later this year to take the first step to raise the federal funds and thus begin normalising monetary policy”.

Regarding Greece she said “the course of the economy and inflation remains uncertain, and unanticipated developments could delay or accelerate the first step”.

On the topics of oil and the strong USD, Yellen said she expected the drag on domestic economic activity from these factors to ease over the course of this year " as the value of the dollar and crude oil prices stabilise, and I anticipate moderate economic growth, on balance, for this year as a whole”.

Foreign Exchange


FX saw some USD buying at the Australia open after the uncertainty surrounding the Greek bailout but the move was not as dramatic as last week. We should expect the USD to be supported until we get more info from Greece and the Wednesday deadline to pass the reforms at the parliament

Updates on Asian currencies and emerging markets

After a strong rally in Chinese stocks on Friday and in the US equity markets, we saw emerging market currencies rally as well, with USD down 1.90% against the Brazilian Real on Friday. However, with uncertainty surrounding Greece, this move lower should be an opportunity for investors to go long USD at better levels this morning.

Exchange rates
Source: Bloomberg
Volatility is higher in EUR and JPY following the Eurozone meetings this Sunday and the deadline  of Wednesday to pass some reforms have pushed volatilities higher with the market wanting to be long gamma over the next few days. The risk reversals still strong favor for AUD and NZD downside and should remain the same for the time being.

Bond Rates

Bunds rallied 9 basis points on Friday after the strong rally in equities and the overall positive mood. We should see some buyers today in Bunds at the open after the new deadline given to Greece as uncertainty is growing.

Source: Bloomberg


On Friday, US markets joined the global rally, with the Nasdaq posting its best advance since January and the S&P having its best climb in two months; amid Greek optimism. European stocks also extended its rally. The VIX was down 15%.

Major sharemarkets

Source: Bloomberg

-- Edited by Adam Courtenay

Singapore Morning Report is compiled by the APAC Sales Trading Team, Saxo Capital Markets, Singapore. Follow us on @SaxoStrats on Twitter

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