Forex Trading Library

Forex Afternoon Wrap – 13/07

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Greece and Europe reach an agreement

Key Notes:

  • China exports y/y 2.8% vs. 1.0%; imports y/y -6.1% vs. -16.2%
  • Japan industrial production m/m -2.1% vs. -2.1%; industrial production y/y -3.9% vs. -4% previously
  • Japan capacity utilization m/m -3% vs. -0.4% previously
  • China CPI y/y 1.4% vs. 1.3%; PPI -4.8% vs. -4.6%
  • Eurogroup meetings

A grueling weekend with failed talks and heated debates within the Eurogroup finally saw a resolution with Greece accepting all of the demand set forth by the Eurogroup committee. The breakthrough was achieved early today on 13th July, announced by Eurogroup head, Jeroen Dijsselbloem. The Euro had initially gapped lower but quickly recovered from the lows to post session highs to 1.1185 but quickly fell back. The ECB meanwhile has left the ELA funding unchanged, which saw the Euro trading below 1.104.

Janet Yellen, in her speech in Cleveland late Friday remained upbeat about the Fed’s interest rate hikes this year while at the same time noted that core inflation remained stubbornly low and would take much longer to reach the Fed’s target of achieving a 2% inflation rate.

The Asian markets today opened on a quiet note with no major releases scheduled for the day. China’s import/export data showed a pickup in exports, while the imports fell a modest -6.1%, although missing estimates of -16.2%. Economic data from Japan included the industrial production which fell -2.1% for the month as expected, while on an annualized basis, Japan’s industrial production was down -3.9%.

The Japanese Yen was subdued with USDJPY surging to intraday session highs above 123.41. The AUDUSD and NZDUSD was flat for the day, trading within Friday’s range.

The early part of the European trading session was ruled by the Eurogroup summit which kicked off after there was no resolution on Sunday. There were some harsh ideas floating around, including one proposed by Germany’s Finance Minister, Wolfgang Schaeuble who wanted to see Greece take a ‘time-out’ for a period of 5-years. The proposal however did not make it to the main draft. However, Greece succumbed to the Eurogroup and agreed to post up to 50 million Euros in assets into a separate fund, in return for bailout funds, which is estimated to be around 86 billion Euros. The creditors also rejected all proposals from Greece including a debt relief. The new proposals need to be approved by various Eurozone parliaments including Greece.

The UK economic calendar was quiet today with no major news events scheduled for the day. However, GBPUSD surged on the Greece news, posting session highs to 1.5571 before easing back lower. The main risk to GBPUSD comes from tomorrow’s monthly inflation figures.

In the US, there are no major releases scheduled for the day and the current themes are likely to play out into the US trading session.

Besides the Greek headlines, Iran Nuclear Talks also progressed despite missing its deadlines, but there was optimism for a deal to be reached which will see the 13-year long crisis come to an end and would also open the doors for Iranian oil to hit the markets besides lifting of monetary sanctions against the country. Crude Oil which has been trading lower since last week was trading near $51.7 a 13-week low.

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