- US personal income up 0.3%; spending flat, core PCE up 1.2% y/y
- Chicago Fed Midwest manufacturing index rise 0.6%
- Moody”s: Continued Greek deposit outflows a key negative for Greek banks
- Chinese PM Wen: China has emerged from financial crisis stronger than before
- Dallas Fed index falls to 17.5 in June from 7.4 in May
- French bank rollover plan includes European debt guarantees
- Reuters: EU working on Plan B for Greece in case Greece votes no on bailouts. talk of bridge loan
- ECB’s Stark tips July rate hike, again
- PM Papandreou predicts passage of austerity laws
- S&P 500 rises 0.9% to 1280
- US 10-year note rises 5 bp to 2.92%
- oil falls 0.50 to $90.70; gold falls $5 to 1296; first close below $1500 since mid-May
EUR/USD fell in early US trade with particular focus on the Moody’s warning that Greek banks continue to use deposits. We slipped to the 1.4160s before spiking sharply higher on demand from Middle Eastern accounts. No doubt Asia was in the mix as well. News that the EU is working on a Plan B as well as talk that French banks may try and manufacture a “Brady Bond” like structure to help induce private-investors to rollover into new Greek debt.
EUR/USD rallied as high as 1.42934 before stalling and falling into a quiet afternoon consolidation. With none of the above proposals cast in stone, it will only take a negative headline or two to send EUR/USD back down in the range. Confirmation of a novel bailout that would appease ratings-agencies should send EUR/USD toward 1.4500, at a minimum. Keep your eyes peeled for any reaction from the Moody’s S&P, et al.
USD/JPY was boosted by firmer US yields and covering of EUR/JPY shorts. PM Kan vowed to stand down if he gets his legislative agenda passed. Offers at 81.00/10 capped the rally and we consolidated gains in quiet afternoon trade. Stops are eyed above 81.10.
CHF weakened on the day as Greek jitters were mildly soothed. EUR/CHF ends at 1.1935. Should Greece get past the finish line this week, look for a short-term short-covering rally . Stops are seen in the 1.1970/80 area near-term.