Forex Afternoon Wrap – 01/07

Jul 01, 12:45 pm

Greece defaults on IMF payment. Tsipras softens stand with creditors – It’s all about Greece!

Key Notes:

  • Australia AIG Manufacturing index 44.2 vs. 52.3 previously
  • Japan Tankan manufacturing index 15 vs. 12; Tankan non-manufacturing index 23 vs. 23
  • China manufacturing PMI 50.2 vs. 50.5; non-manufacturing PMI 53.8 vs. 53.2 previously
  • Australia building approvals m/m 2.4% vs. 1.2%
  • Japan final manufacturing PMI 50.1 vs. 49.9
  • China HSBC final manufacturing PMI 49.4 vs. 49.6
  • Australia commodity prices y/y -17.9% vs. -20.8% previously
  • Spain manufacturing PMI 54.5 vs. 55.6
  • Switzerland manufacturing PMI 50 vs. 50
  • Italy manufacturing PMI 54.1 vs. 54.4
  • France manufacturing PMI 50.7 vs. 50.5
  • Germany manufacturing PMI 51.9 vs. 51.9
  • Eurozone manufacturing PMI 52.5 vs. 52.5
  • UK manufacturing PMI51.4 vs. 52.6
  • BoE Governor Carney speech in London
  • US MBA mortgage applications -4.7% vs. 1.6% previously
  • US Challenger job cuts y/y 42.7% vs. -22.5% previously
  • US ADP employment change 237k vs. 218k

Later:

  • PMI Manufacturing
  • ISM Manufacturing
  • Construction spending
  • ECB Draghi speech

The financial markets woke up today to an expected outcome from Greece. The country became the first advanced economy to default on its loan repayment to the IMF, although technically the default is being called ‘arrears’ Greece continues to hog the limelight in a day where things moved faster than usual.

With the start of a new trading month, the economic data was packed from the Asian trading session with manufacturing PMI data on the tap. Australia’s PMI fell to 44.2 from last month’s 52.3, while China’s manufacturing PMI was soft at 50.2. Building approvals for the month surged 2.4% in Australia, up from a dismal -5.2% previously. The Aussie initially surged on the news to post a session highs above 0.77325 but failed to keep its gains as the currency fell to 0.7675 lows. The Kiwi staged a modest rally towards 0.68 before giving up most of its gains to trade back in the red, near yesterday’s lows of 0.675.

The Yen continued to remain bid across the board with a modestly higher Tankan manufacturing data early in the day before easing into the North American trading session.

From Europe, various manufacturing PMI data were released with no major surprises. Eurozone manufacturing PMI met estimates of 52.5, but the focus for the Euro, single currency was that on Greece. After the failure to pay the IMF, news wires reported that Alexis Tsipras’ was willing to accept the bailout terms with minor changes. This was however rebuked by the EU and the Eurogroup setting the stage for a referendum on the 5th of July.

EURUSD was mostly weaker today, trading near 1.109 at the time of writing. We suspect that further declines to 1.095 support is very much a possibility in the run up to the Greek referendum.

From UK, manufacturing PMI fell short of estimates, rising 51.4 a soft print from last month’s 51.9. The Pound Sterling which has been weaker in recent days continued its declines with GBPUSD trading near 1.565 at the time of writing.

The US trading session saw the ADP private payroll data which posted a healthy 237k print, beating estimates of 219k. Previous month’s number was also revised from 201k to 203k.  The US Dollar Index was well supported above 95.5 and currently poised to test previous resistance at 96.5. A break higher could set the bullish scenario back into play.

Other economic data later in the day includes the ISM and PMI manufacturing data as well as construction spending and vehicle sales.

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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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