23 Feb 2015
Asia Recap: Approval of Greek reform measures by Eurogroup main focus
FXStreet (Bali) - The Asian session on Monday exhibited cautious moves, with G10 currencies in consolidation mode ahead of the reform measures to be presented by Greek FinMin Varoufakis to the Eurogroup, a potential risk event, following the 'pre-agreed' 4-month bailout extension last Friday.
Even if the EU approve temporary access to more funding by Greece, as George Saravelos, Strategist at Deutsche Bank, notes, "the road ahead remains long, and it remains unclear how the current government can navigate between the commitments it has made to Europe with competing domestic political demands – both internally within the SYRIZA party as well as with to the electorate."
Reports over the weekend, though, via the Financial Times, citing officials who have seen the weekend submission from Athens, are not that encouraging, noting that the reform measures intended to be submitted by Greece this Monday as vague as the previous ones. The FT notes: "If the EU and IMF do not approve of the Greek measures as “sufficiently comprehensive to be a valid starting point” for completing the current bailout, eurozone officials have agreed that another Brussels meeting of finance ministers will be needed on Tuesday. Without approval, Greece’s EU bailout will expire on Saturday."
In other weekend news, an unnamed ECB source, via Reuters, said that the Central Bank sees no need for Greek capital controls following last Friday's pre-agreement for a loan extension with the Eurogroup, adding that the ECB is ready to reintroduce waiver for Greek collateral once it assessed that the Greek programme is likely to have a satisfactory conclusion.
We also saw the Minutes of the Monetary Policy Meeting by the BOJ on January 20 and 21 published today, with the Central Bank still sounding upbeat on the inflation outlook going forward, subject to a gradual recovery in oil prices. BoJ Governor Kuroda, later on the day, appeared before the Japanese parliament, reinforcing the optimistic inflationary stance, saying that Japan consumer inflation is likely to reach 2 pct in period centering on fiscal 2015.
News out of New Zealand worth monitoring as well. According to Bank of New Zealand, an announcement by Fonterra updating its 2014/15 milk price forecast is rumored for this week, noting that upside potential is forming. Another source of market interest for the week will be the eradication of any potential spread of fruit flies in New Zealand, after the discovery in central Auckland
BNZ notes: "According to the Ministry for Primary Industries (MPI), the Queensland fruit fly is one of the most damaging fruit fly pests as it infests more than 100 species of fruit and vegetables. Hosts include commercial crops such as avocado, citrus, feijoa, grape, peppers, persimmon, pip fruit, and stone fruit. If this fly were to establish, it would have serious consequences for New Zealand’s horticultural industry, and beyond. Horticulture alone accounts for around 7% to 8% of NZ merchandise exports. So, while a risk seemingly as small as the fruit fly itself, it needs to be taken seriously for the impacts it could potentially have, as a very worst case scenario."
The Australian Dollar will also be a focal point of attention as it continues to deal at a 'make or break' level, with smart money counter-trend players seeking to breakout 0.7850 before a possible exhaustion after successive topside failure over the past week, while other market players are looking to re-enter strategic short positions around current dealt levels. The Euro, meanwhile, is dealing at $1.1380, well capped below $1.14 in Asia. The Japanese Yen is seeking liquidity circa 118.80 after USD failed at Y119.15/20.
Even if the EU approve temporary access to more funding by Greece, as George Saravelos, Strategist at Deutsche Bank, notes, "the road ahead remains long, and it remains unclear how the current government can navigate between the commitments it has made to Europe with competing domestic political demands – both internally within the SYRIZA party as well as with to the electorate."
Reports over the weekend, though, via the Financial Times, citing officials who have seen the weekend submission from Athens, are not that encouraging, noting that the reform measures intended to be submitted by Greece this Monday as vague as the previous ones. The FT notes: "If the EU and IMF do not approve of the Greek measures as “sufficiently comprehensive to be a valid starting point” for completing the current bailout, eurozone officials have agreed that another Brussels meeting of finance ministers will be needed on Tuesday. Without approval, Greece’s EU bailout will expire on Saturday."
In other weekend news, an unnamed ECB source, via Reuters, said that the Central Bank sees no need for Greek capital controls following last Friday's pre-agreement for a loan extension with the Eurogroup, adding that the ECB is ready to reintroduce waiver for Greek collateral once it assessed that the Greek programme is likely to have a satisfactory conclusion.
We also saw the Minutes of the Monetary Policy Meeting by the BOJ on January 20 and 21 published today, with the Central Bank still sounding upbeat on the inflation outlook going forward, subject to a gradual recovery in oil prices. BoJ Governor Kuroda, later on the day, appeared before the Japanese parliament, reinforcing the optimistic inflationary stance, saying that Japan consumer inflation is likely to reach 2 pct in period centering on fiscal 2015.
News out of New Zealand worth monitoring as well. According to Bank of New Zealand, an announcement by Fonterra updating its 2014/15 milk price forecast is rumored for this week, noting that upside potential is forming. Another source of market interest for the week will be the eradication of any potential spread of fruit flies in New Zealand, after the discovery in central Auckland
BNZ notes: "According to the Ministry for Primary Industries (MPI), the Queensland fruit fly is one of the most damaging fruit fly pests as it infests more than 100 species of fruit and vegetables. Hosts include commercial crops such as avocado, citrus, feijoa, grape, peppers, persimmon, pip fruit, and stone fruit. If this fly were to establish, it would have serious consequences for New Zealand’s horticultural industry, and beyond. Horticulture alone accounts for around 7% to 8% of NZ merchandise exports. So, while a risk seemingly as small as the fruit fly itself, it needs to be taken seriously for the impacts it could potentially have, as a very worst case scenario."
The Australian Dollar will also be a focal point of attention as it continues to deal at a 'make or break' level, with smart money counter-trend players seeking to breakout 0.7850 before a possible exhaustion after successive topside failure over the past week, while other market players are looking to re-enter strategic short positions around current dealt levels. The Euro, meanwhile, is dealing at $1.1380, well capped below $1.14 in Asia. The Japanese Yen is seeking liquidity circa 118.80 after USD failed at Y119.15/20.