Greek deal all priced in to risk appetites

By Kymberly Martin

NZD

The NZD/USD has eased lower over the past 24-hours, interrupted by some volatility after the final announcement on the Greek/Troika negotiations. The NZD/USD currently trades at 0.8360.

Yesterday’s release of the RBNZ 2-year-ahead inflation expectations showed some easing from 2.80% to 2.50%. Following this, the NZD/USD eased a little lower, almost touching 0.8340 yesterday afternoon.

Then the announcement of a final deal in the protracted Greek negotiations (see Majors)  saw the NZD benefit temporarily from a knee-jerk buying of “risky” assets. It rose above 0.8400 last night. However, the response proved short-lived, and the NZD/USD drifted off to trade around 0.8360 this morning, still comfortably within its range since the start of the month.

After the Greek announcement the EUR had a surge higher. This saw the NZD/EUR drop from above 0.6340 to below 0.6320. A general downward trend then continued overnight, seeing the NZD/EUR trade at 0.6300 currently. This has seen the NZD/EUR pull-back from its Euro-era highs last week. Still, with the “good news” now priced in the EUR we would not see significant further downside for the NZD/EUR in the near term.

The NZD was very range-bound on the cross, with the NZD/AUD tracking sideways around 0.7820 overnight.

Today, the release of NZ credit card data is unlikely to be market moving. Expect the NZD to take its cue from global developments. Attention will return to data today, with a slew of global PMI releases, kicking off with China’s this afternoon. We see support on the NZD/USD at 0.8320 and resistance at 0.8410.

Majors

After the final announcement of a deal in the Greek bail-out talks the knee-jerk rise in the EUR/USD proved short-lived. The USD is fairly flat over the past 24-hours with the AUD and NZD amongst the weakest performers.

Yesterday evening, there was finally agreement between the Troika and Greece on the terms of their bail-out. Key specifics were; a total €130b package; a target of Greek debt/GDP of 120.5% by 2020; a PSI “haircut” of 53%; central banks will not participate in the PSI but pass back accrued interest on Greek bonds to Greece. The bailout also comes with stringent new terms, including having a permanent team of monitors in Greece to ensure implementation of harsh austerity measures.

Given how far risk appetite has already run since the start of the year, the market response was less than euphoric. The Euro Stoxx 50 closed down 0.34% and the S&P500 is currently fighting to hold onto a modest 0.20% gain.

Immediately following the announcement, the EUR surged from around 1.3190 to around 1.3290. However, it proved short-lived, with the EUR drifting off to 1.3200 early this morning. It currently trades at 1.3240.

Conversely the USD index initially plunged from almost 79.30 to 78.80. Overnight, it then clawed its way back to trade above 79.00 currently.

The USD/JPY was relatively range-bound around the 79.70 level. The USD/JPY is consolidating its gains that were encouraged by the BoJ announcement of further quantitative easing, earlier this month. The USD/JPY now trades back at levels seen in July last year.

The AUD has drifted lower over the past 24-hours. The RBA minutes released yesterday did not rule out further easing if the economic outlook weakens “materially”. For now, they are comfortable with the 50bps of cuts already undertaken. The AUD/USD trades at 1.0690 currently, at the lower edge of the range it has traded since the start of the month.

In the day ahead, AU leading indicators will be released along with the AU wage cost index. This afternoon the HSBC Flash Chinese Manufacturing PMI is released. Any further signs of easing (currently 48.8) could weigh on the AUD. Tonight we get European PMI along with the Bank of England minutes and US homes sales data.

All its research is available here.