Yellen to skip Jackson Hole in lead-up to June Fed decision, Greek farce rolls on, NZD may gain aginst the AUD

By Raiko Shareef

The USD continues to drift higher in a relatively data-light evening. JPY continues to underperform, falling just 6pts short of printing a 13-year high.

EUR is among the better performers, after (now refuted) claims that the wording for a Greek deal would begin the drafting process imminently..

Early in the European session, Greek media broke the news that Greece had bridged enough of the gap with its creditors that the parties would start to draft an accord on Wednesday night. Greek PM Tsipras said that a solution is “close”. This supported risk sentiment, with benchmark equity indices regaining most (if not all) their losses fromTuesday, and EUR popping higher from lows around 1.0820.

But it quickly became clear that Greek officials were presenting a rosier picture on negotiation than their European counterparts.

Firstly, the European Commission stated that a deal is not imminent, and just an hour ago, German Finance Minister Schaeuble said he was surprised to hear reports of an imminent deal. Across asset classes, only bond markets seem to have taken the latter message on board. EUR/USD and equities have largely held onto their gains.

Elsewhere, among the peripherally interesting news, the Fed announced that Chair Yellen would not attend the annual Jackson Hole central banking symposium, to be held this year on 27-29 August. However, she may attend the event in future years.

To us, this seems like a sensible move. Much focus has been drawn to that conference in recent years, with investors keen to pounce on the merest whiff of policy guidance, however unintended. Ahead of what could be the first Fed Funds Rate hike at the September policy meeting, Chair Yellen will avoid muddying the waters, an inevitable outcome had she delivered a keynote speech.

NZD/USD sits near its recent lows, having failed to hold on to rallies above 0.7250.

We continue to await Fonterra’s 2015/16 payout estimate, due within the next few hours. We’re keeping an eye on NZD/AUD, which looks to be readying for another lurch higher. Having flirted with the 200-day moving average all week, it looks to close above that 0.9356 level today.

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Raiko Shareef is on the BNZ Research team. All its research is available here.