- Greece, EU/IMF looking at hiking Tobacco, alcohol, fuel taxes by at least 10%
- Greece discussing hiking VAT 23-25% as part of 3 year deal with EU/IMF
- German SPD leader says ready to allow Greek aid decision before May 9 state election
- German April Jobless -68k to 3.285mln, unemployment 7.8%
- UK Nationwide says House prices +1.0% m/m in April. +10.5% y/y, biggest rise since June 2007
- ECB Weber says Greek default would have incalculable impact
- Weber says aid for Greece best way to prevent crisis spreading
- Moody’s says fundamental assessment of Irish ratings not changed by recent nervous markets
- German FinMin Schaeuble says market players should not take rating agencies too seriously
- EZ April business climate 0.23 (poll -0.10)
- EU Rehn says cannot give details of Greek deal today
Theme – recovery day with the US Dollar under pressure against the field. Jitters over Greece look like they are finally easing (even if it is only in the short-run) and extreme positioning now questioned. Stops tripped in EUR/USD and GBP/USD above 1.3270 and 1.5250 respectively. Commodity currencies back in favour across the board led by the loonie and the Kiwi.
EUR/USD traded down to 1.3184 in early Asia but dealt mostly 00/20 until downside support (Asian central banks) caused a rethink. Pair eventually “grinded” its way through heavy sell orders 1.3240/50 before “popping” to 1.3279 on news that Germany ready to allow the Greek aid decision before the outcome of the May 9 state election (thus showing renewed signs of urgency on the part of German politicians). Pair fell back to 1.3240 once the stops were done helped in part by EU Rehn comment that he could not give details of Greece deal today.; last at 1.3240.
GBP/USD has been whippy within a broad 1.5142-1.5266 intraday range. Not helping has been wild swings in EUR/GBP as macro players bought first up in Asia (0.8680 to 0.8734) on the basis that the UK must be next in line to have its ratings downgraded. The pair then collapsed in early London as straight GBP/USD ran into strong buying interest from Asian central bank (believed to be Bank of Korea who has intervened in USD/KRW aggressively this week) forcing weak shorts to cover above 1.5220 and again above 1.5250; last at 1.5235.
USD/JPY mostly sidelined as Japan commences Golden Week, content to hang around 94.00. JPY crosses however all strong across the board as “risk on” trades roar back into favour; last at 94.04
Commodity Currencies – strong across the board led by the loonie and kiwi with AUD for once bringing up the rear. The RBNZ kept interest rates unchanged but changed the wording slightly. Market couldn’t”t quite make up its mind whether it was a hawkish or dovish change. AUD/NZD rose then fell sharply. In Australia columnists expect the RBA to hike another 25bps next Tuesday although market still has it as a 50/50 proposition. USD/CAD last at 1.0040, NZD/USD 0.7215, AUD/USD 0.9280.
Stocks – a little mixed in Asia – Hang Seng -1.0%, Australia -0.8%, Tokyo on holidays. Europe mostly up led by the CAC +0.8%, FTSE +0.6% and Dax +0.4%.
Gold up $2.00 from the NY close.
