US strengthens on a safe haven buying as the Greece saga continues

strong usd

The US dollar remains broadly higher against its counterparts this morning as an almost certain default by Greece on a €1.6 billion loan repayment to the International Monetary Fund later in the day continues to support safe-haven demand. Also, the supportive consumer confidence reports out from the US turn the greenback on an uptick across the board.

Canadian dollar weakened against the greenback after data showed that Canada’s economy contracted in April and as markets remained cautious amid mounting fears over a Greek default. Gold is soft, trading at the lower end of its one month range and commodities are conflicted.

The Euro is weak against the USD. Greek risk remains elevated as the looming IMF payment and expiry of the current bailout programme at midnight. Hopes for an agreement are high, however failure to resolve the current impasse would further complicate the ECB’s Emergency Liquidity Assistance.

The is quiet as the reaction of stronger domestic GDP has been minimal on the currency, and the domestic policy expectations are softening with a second consecutive decline in Overnight Index Swap.

Expected Trading range for the USD/CAD is 1.2425 – 1.2525, EUR/USD is 1.1100 – 1.1325 and GBP/USD is 1.5675 – 1.5825. 

Investors continue to flock toward the greenback

gdp

Today’s FX Comment

Opening FX Rates Canadian Crosses Opening Commodities (USD)
USD/CAD 1.2365 CAD/USD 0.8087 Oil 58.60
EUR/USD 1.1191 EUR/CAD 1.3839 Gold 1171.40
GBP/USD 1.5733 GBP/CAD 1.9458 Silver 15.59
USD/JPY 122.45 CAD/JPY 98.99
AUD/USD 0.7692 AUD/CAD 0.9509
USD/PLN 3.7434 CAD/PLN 3.0265

Investor continue to flock toward the greenback

The trajectory of the U.S dollar this week will come down to whether markets care more about safety or growth.  The U.S. dollar is still considered the world’s safest currency and should the crisis in Greece deepen even further than it already has, the markets could see investors flock toward the greenback.  The greenback has already moved higher on the back of the uncertainty in Greece and may continue to appreciate in the coming days. This month’s non-farm payrolls report is extremely important but how the Greek crisis plays out could have an even more significant impact on the greenback.

Loonie clipped by falling oil

The Canadian dollar was hit the hardest in Monday’s trade. Lower oil prices offset the rise in raw material and industrial production prices. Today we get the GDP number from Canada and while this data point is important, risk appetite will continue to remain the primary driver in the short term.  Our forecast continues to call for Canadian dollar weakness; however, given the current risk environment in Europe, we could see a dramatic weakening of the loonie in the coming days.

Euro’s performance is confusing

With senior Greek government officials saying that today’s payment to the IMF will not be made, the euro should be trading much lower. However instead of falling it ended the day sharply higher against the U.S. dollar. EUR/USD rose close to 3% intraday from a low of 1.0955 to a high of 1.1278. The primary reason that is preventing a euro collapse – intervention from the Swiss National Bank in an attempt to stabilize the EUR/CHF pair.

Synopsis of events leading into today’s Greek deadline

When the FX market opened on Sunday, the single currency dropped from 1.1150 to 1.0955 after Greek Prime Minister Tsipras called a referendum on the new bailout deal on Friday evening. At the time, many investors dumped euros on the fear that a default and Grexit would drive EUR/USD to 1.05. In response, Eurozone Finance Ministers refused to extend the bailout beyond Tuesday. On Sunday, the Greek government moved forward with this plan by setting a date for the referendum (July 5) and shortly thereafter the European Central Bank refused to increase the level of Emergency Liquidity Assistance. In turn, the Greek government was forced to close banks for the next week and institute a very low withdrawal (USD$66) limit. The seemingly never ending Greek saga continues to dominate headlines and we expect the euro to experience wild currency swings.

Pound gains on Grexit fears

The British pound ended yesterday unchanged against the U.S. dollar. U.K. mortgage approvals and consumer credit fell short of expectations but investors shrugged off the release because the risk of holding euros has made sterling increasingly attractive. While the Bank of England is next in line to raise interest rates, no one expects them to do so this year. As a result, the outlook for the currency has not changed significantly. Instead, investors are shifting their funds from euros to sterling on the fear that a Grexit could lead to more volatility in the currency. UK first quarter GDP and current account numbers are scheduled for release today. Stronger numbers are expected and an upside surprise could lead to a significantly stronger pound.

Greece imposes capital control, shakes the Euro

Greece-ATM2-Getty

The US dollar rallies on risk aversion arising from Greece. Near term focus is likely to remain centered on Greece, however this week’s U.S. data presents material risk for FX with a shortened week and Thursday’s payrolls. Only one Fed speech is on tap tomorrow from non-voting hawk Bullard.

Canadian dollar is weak after dropping 0.3% from Friday’s close with a continuous decline that appears to trend in that direction into the NA open. Oil prices, volatility and broader market sentiment are the key drivers for the loonie in the near term, providing downward pressure in response to Greece. Domestic risk this week is relatively limited, with monthly GDP data out tomorrow.

The Euro is soft and has staged an impressive recovery from its near 2.0% decline early in the Asian session and appears to be strengthening this morning. The unexpected announcement of a Greek bailout referendum has provided for a gap down in EUR and near term stabilization was observed around 1.1000 areas. Fundamental data have had no discernible impact on EUR, despite the unexpected improvement in Spain’s CPI.

The pound sterling opens soft as near term risks lie to the downside, however the markets look to the potential for some offsetting gains in response to Tomorrow’s final GDP revision for Q1.

Expected Trading range for the USD/CAD is 1.2325 – 1.2425, EUR/USD is 1.1050 – 1.1225 and GBP/USD is 1.5700 – 1.5850. 

Greek risks dominate the FX market

Greek_Flag

Today’s FX Comment

Opening FX Rates Canadian Crosses Opening Commodities (USD)
USD/CAD 1.2351 CAD/USD 0.8095 Oil 58.99
EUR/USD 1.1127 EUR/CAD 1.3731 Gold 1183.00
GBP/USD 1.5719 GBP/CAD 1.9411 Silver 15.82
USD/JPY 122.78 CAD/JPY 99.42
AUD/USD 0.7664 AUD/CAD 0.9459
USD/PLN 3.7655 CAD/PLN 3.0504

Greek risks dominate the FX market

The Canadian dollar had an uneventful last week with the pair confined to a very narrow range given the lack of domestic data. This week is a little heavier on the data front with the release of Canadian GDP, U.S pending home sales, U.S consumer confidence and U.S. employment data.

The CAD is soft to start the week and is down modestly from Friday’s close. Negative loonie sentiment seems to be accelerating into the North American open. Oil prices, volatility and general market themes remain the key drivers for the loonie this week. Greece continues to remain front and centre while the Canadian GDP data release on Tuesday remains the key domestic data risk for the week.

Technicals have turned bullish with the pair looking to target the 1.2563 level. Expect a very volatile week given the shorted week with the Canada day holiday on Wednesday, the 4th of July holiday in the U.S on Friday and the Greek saga which continues to capture the attention of the FX markets.

Greece default risk grows

The euro slid lower against the dollar and the other major currencies last Friday, pressured lower amid uncertainty as negotiations between Greece and its international lenders continued. Sentiment on the single currency was hit by concerns over whether Greece could reach an agreement with its international lenders in time to avert a default.

The Greek debt story became more dramatic after markets closed with the announcement of post-deadline referendum. In the week ahead, markets will be focusing on developments in Greece after Prime Minister Alexis Tsipras abandoned negotiations with creditors on Saturday and called for a referendum to be held on July 5 on the terms proposed by lenders for extending the country’s bailout program. European finance ministers refused a request from the Greek government to extend the bailout program until after the referendum.

European Central Bank said Sunday it will continue providing emergency liquidity assistance to Greece’s banks, but capped emergency funding at current levels. The ECB said it was monitoring the situation and stood ready “to reconsider its decision.”

GBP on another showdown this week

The pound was little changed against the dollar late Friday, but gained ground against the broadly weaker euro as uncertainty over Greece’s debt negotiations sapped investor demand for the single currency.

The pair sustained sharp losses last week, losing close to 200 points. There were no significant releases out of the UK last week, but monetary divergence between the Fed and BOE is weighing on the pound. Economic data prints this week should provide direction for the pound. This week’s highligths include PMI reports. overall manufacturing, services, and construction.  Data continues to remain positive pointing to a strong pace of recovery for the economy which should support the GBP in the short term.

US Dollar vulnerable as China worries in Focus and Greek drama continues

china and greece

The US dollar is fairly higher this morning against its majors as data showed that U.S. consumer sentiment improved unexpectedly this month, fuelling further optimism over the strength of the economy.

Canadian dollar is soft, trading within a remarkably narrow range as we head into weekend risk centered on Greece, with an added focus on China as well as M&A activity.

The Euro is around 1.12 area consolidating within a narrow range for the second consecutive session ahead of considerable risk given weekend Greek negotiations as well as the June 30 IMF payment deadline and current program conclusion.

The pound sterling is flat, its narrow range a reflection of broader uncertainty heading into weekend risk.

Expected Trading range for the USD/CAD is 1.2325 – 1.2425, EUR/USD is 1.1100 – 1.1300 and GBP/USD is 1.5675 – 1.5825. 

Turbulence ahead for the loonie

volatility ahead

Today’s FX Comment

Opening FX Rates Canadian Crosses Opening Commodities (USD)
USD/CAD 1.2356 CAD/USD 0.8093 Oil 59.17
EUR/USD 1.1201 EUR/CAD 1.3845 Gold 1172.00
GBP/USD 1.5724 GBP/CAD 1.9443 Silver 15.76
USD/JPY 123.72 CAD/JPY 100.07
AUD/USD 0.7658 AUD/CAD 0.9464
USD/PLN 3.7267 CAD/PLN 3.0144

Turbulence ahead for the loonie

The Canadian dollar closed higher against the greenback on yesterday, recovering losses from earlier in the week. CAD appreciation was limited by this week’s lack of domestic economic data and by the entire markets focus on talks to reach a Greek debt deal.

The Canadian dollar closed at C$1.2323 to the greenback and traded between C$1.2315 and $1.2399 against the U.S. dollar during the session. Data yesterday showed U.S. consumer spending recorded its largest increase in nearly six years in May, the latest evidence that U.S. economic growth has been picking up steam in the second quarter after a tough first quarter.

The loonie could experience more volatility next week, with less liquidity expected due to the Canada Day holiday on Wednesday and the U.S. Fourth of July holiday on Friday. Canadian April GDP data is due on Tuesday and U.S. employment figures on Thursday.  We expect much of the same today with a very range bound trading pattern unless a deal is reached with the Greek debt talks.

Euro in holding pattern

The euro continues to remain in a holding pattern having gone nowhere in the past 24 hours as Greece continues to hang in the balance after the latest round of talks failed to clinch a funding deal.

Euro zone finance ministers ended their third meeting in a week without agreement on Thursday, leaving Greece staring at the prospect of defaulting on a repayment to the International Monetary Fund on Tuesday. A default could start a bank run and capital controls, possibly setting Athens on a path out of the euro zone.  The focus now turns to the resumption of talks on Saturday morning and based on comments from both sides there seems to be a strong desire to get a deal done.  Expect much of the same today unless there is news of an agreement.

GBP under pressure

GBP is quiet in the absence of domestic data and seems to have consolidated at the lower end of its recent range. Relative monetary policy remains the primary driver for the currency with the markets pricing in 70% probability for a rate increase in the next 12 months. The recent decline in the sterling can be directly attributed to a diverging monetary policy between the Fed and the BoE.   An improving outlook in the U.S. is firming expectations of Fed normalization.  Today’s risk event lies with a speech by BoE governor Carney.

US Dollar slips as Greek talks fray

spending

The US dollar is mixed as reports showed this morning that US personal spending rose at the fastest rate since august 2009 and initial jobless claims raised fairly less than expected last week; The Greek situation continues to pressure the markets.

Canadian dollar is quiet despite the rise in concerns surrounding Greece as market participants look to the primary driver of relative central bank policy with U.S. data the core focus in the context of a light week for domestic data.

The Euro strengthens against the greenback as new divisions between Greece and its official creditors raised the risk quotient in the market. With other risks around, the market did not reward the dollar when the third official estimate of first-quarter US growth showed a smaller contraction than earlier believed, 0.2 percent rather than 0.5 percent.

The pound sterling is quiet today with no domestic data out, remaining relatively insulated from the market risk focused on Greece.

Expected Trading range for the USD/CAD is 1.2325 – 1.2425, EUR/USD is 1.1100 – 1.1300 and GBP/USD is 1.5675 – 1.5825. 

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