Forex Market Commentaries - Checklist For Greece Deal

Austerity? Check. Bailout? Check. Growth Plan? Err…

Feb 21 • Market Commentaries • 1582 Views • No Comments

If there’s a metaphor for the Dutch finance minister being locked out of his hotel room upon his return after “exhausting” negotiations then others will have to supply it. There was a certain amount of irony at play given his call for a permanent presence by the troika in Athens for the duration of the austerity measures.

I’m sure the more forensic journalists and economists amongst us will wonder if his daily room rate will be above the €685 minimum monthly wage Greeks have now ‘signed up’ to in order to receive the second bailout, whilst the overall expenses are a (relatively) small matter it’s natural to be curious as to how much has been racked up by the politicians and representatives of the troika over the past two years whilst engineering a solution for the Eurozone crisis. Perhaps the official Eurostats dept. could supply the figures and detail who gets to pay.

What’s also curious is the observation that neither Merkel or Sarkozy were present to finally champion the deal, despite having been the flag bearers for Europe over recent months. Could they know that, despite the ‘good’ news, the plan is simply the first step on an extremely rocky road that Greece cannot possibly walk the length of?

The “markets” reaction to the agreement has been muted, the euro experienced a spike up shortly after the announcement but then retreated, the spike being evidence of ‘algo’ trading more then genuine sentiment driving the market up. The next hurdle for Greece is not the payments in return for dutiful adherence to the plan, it’s the general election looming in April when theoretically the plan could be ripped up six weeks after implementation. The technocratic coalition government cannot possibly hold tight during the election process, therefore the plan could ultimately be scuttled.

The focus has changed, no longer is fiscal prudence the obsession the survival of any semblance of democracy is the key issue. For those ‘ordinary’ Greeks, who recoiled as they witnessed their power usurped by technocrats, they have a chance to voice their concerns at the ballot box..surely nothing can prevent that? Martial law, a secret coalition agreement already entered into to delay elections until 2014?

This is an irony and coincidence to the overall situation way above the Dutch finance minister De Jäger being locked out of his room, the Greek people have an opportunity to finally have their say in the cradle and birthplace of democracy. If we’re looking for reasons as to why any celebrations have been put on hold by the overall powers who have constructed the deal then there is your answer. This ‘deal’ has a shelf life of six weeks which is why any debate on the full ramifications can wait given all parties know it’s unworkable and the headline rescue figure of €130 billion is a gross underestimate.

Market Overview
Most European indices were flat or fell whilst the euro pared gains versus the dollar as investors weighed up whether or not Greece’s bailout gives the country enough breathing space in order to fix its economy. The Stoxx Europe 600 Index slipped 0.1 percent at 9:30 a.m. in London. Standard & Poor’s 500 Index futures added 0.5 percent after the gauge climbed to the highest level since April on Feb. 17. The euro strengthened 0.2 percent to $1.3265, after appreciating as much as 0.4 percent. The Australian dollar weakened against all 16 of its most-traded peers. The 10-year U.S. Treasury yield rose four basis points to 2.04 percent. Copper increased for a second day.

 

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Market snapshot at 10:00 am GMT (UK time)

With the exception of Japan Asia-Pacific markers enjoyed a positive early morning trading session. The Nikkei closed down 0.23%, the Hang Seng closed up 0.25% and the CSI closed up 0.86%. the ASX 200 closed up 0.82%. European markets have failed to rally after the news of the Eurogroup/troika finally agreeing a deal with the Greek coalition government. The STOXX 50 is down 0.15%, the FTSE is down 0.26%, the CAC is down 0.26%, the DAX is down 0.13% whilst the Athens exchange, the ASE is down by 1.0%. ICE Brent crude has dipped below $120 a barrel down $0.30 per barrel. Comex gold is up $15.40 an ounce.

Commodity Basics
Oil traded close to its highest price in nine months after euro-area finance ministers agreed on the second bailout for Greece, improving prospects for fuel demand. Futures in New York advanced as much as 2.1 percent from Feb. 17. Brent futures were little changed in London as Europe Union finance ministers awarded 130 billion euros today in aid to Greece.

Oil futures for March delivery on the NYMEX expire today, they advanced as much as $2.20 from the Feb. 17 closing price to $105.44, the highest intraday price since May 5. The contract was at $105.06 at 9:09 a.m. in London, while the more-actively traded April future gained $1.80 to $105.40. Prices are 12 percent higher than a year ago.

China, the biggest buyer of Iranian crude, cut purchases in January to the lowest level in five months after oil companies in the two nations failed to renew contracts. Crude imports were 2.08 million metric tons, circa 493,000 barrels a day, down 5 percent from a year ago and 14 percent from December.

Forex Spot-Lite
The euro climbed to a three-month high versus the yen after euro-area finance ministers agreed to award Greece a second bailout package to stave off a default next month.

The 17-nation currency was little changed versus the dollar after erasing an intra-day advance as Luxembourg Prime Minister Jean-Claude Juncker said the deal includes a 53.5 percent write-down for investors in Greek bonds, greater than a previous arrangement. The Australian dollar weakened after the Reserve Bank said in minutes of its Feb. 7 meeting that there is scope to ease monetary policy.

The euro rose 0.2 percent to 105.69 yen at 8:22 a.m. London time, after touching 106.01 yen, the most since Nov. 14. Europe’s common currency traded at $1.3247 after reaching $1.3293 earlier, the strongest level since Feb. 9. The dollar gained 0.2 percent to 79.80 yen. The so-called Aussie dollar slid 0.4 percent to $1.0711.

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