Greece to steal the Limelight, a busy European session ahead

FXStreet (Mumbai) – The demand for safe havens such as Swiss franc and yen was on the rise in Asia as markets gear up for further Greece updates ahead of today’s IMF repayment deadline. The Antipodeans were heavily offered on weaker domestic economic releases while a broadly stronger US dollar also kept a lid on the OZ currencies.

Key headlines in Asia

Last minute EU’s Juncker offer to Greece rejected

New Zealand: Business confidence and activity receding in May

Australia cuts 2015 iron ore price forecast

Dominating themes in Asia – centered on JPY, AUD, NZD

A low key affair in Asia, with Asian equities rebounding largely on profit-taking after the recent Greece-backed slump. The Nikkei 225 in Tokyo trades at 20187 and is currently up 0.30%, while Australian benchmark the ASX 200 trades modestly in green at 5423.40

The biggest gainer this session was the Swiss franc, followed by the Japanese yen, both benefitted by risk-off flows as Greek drama continues with traders flocking to safe-havens as the Greek deadline expires today. USD/CHF hovers around 0.9300, losing -0.60% on the day while USD/JPY is changing hands at 122.32, recording a -0.18% loss so far. While EUR/USD was offered below 1.1200 following Greece’s rejection to the last-minute deal opportunity to reach a deal offered by European Commission Chief Juncker.

The Kiwi was the main laggard, sinking near five-year lows near 0.68 after the country’s business confidence gauge slumped more than expected, pointing towards further RBNZ rate cut. ANZ’s Business Confidence survey, released Tuesday, showed a net 2.3% of firms felt that the outlook for business and the economy was weaker in June. While the Aussie tracked the NZD/USD lower, keeping red sub 0.7700 levels.

Heading into Europe – centered on EUR, GBP

A busy European session ahead, with a host of Euro zone and UK data lined up release today. The session will kick-off with Germany’s May retail sales data. A 0.3% increase is expected on monthly basis, following 1.7% hike in April, while adding 3.0% year-on-year, following 1.0% gain reported a month ago.

To be followed by Germany’s labor data for June, with the unemployment rate expected to remain at 6.4%, after the same rate recorded in May.

UK GDP 3rd estimate will be published during mid-European session. Markets expect a slightly higher 0.4% growth in Q1, quarter-on-quarter, than the 0.3% growth suggested in the 2nd estimate, while annual GDP growth is expected to show 2.5% expansion rather than 2.4% suggested earlier.

The euro zone will publish its June inflation data estimate later in the session, with inflation expected to register 0.2% increase, year-on-year. In May, consumer price growth in the euro zone had reached a 0.3% annual level. The euro zone will also report its May labor data. The rate of registered unemployed in the region was 11.1% in April, and it is expected to remain at the same level.

Later in the North American session, we have consumer confidence, HPI and Chicago PMI data from the US while GDP print from Canada will also be closely eyed.

Besides, Greece headlines are likely to take the centre-stage in today’s trading session with investors remain wary about a possible Greek default.

EUR/USD Outlook

Sean Callow of Westpac notes “EUR/USD lost as much as 2 cents Monday morning in Sydney but had recaptured all this lost ground by the NY morning, steadying around 1.1235. This is the latest example of EUR price action not matching news around Greece. Many factors are likely to be in play but one is of course the potential for inflows to the haven bond markets such as Germany, France and the Netherlands.”

“Positioning is also likely to be limiting EUR downside, with specs adding to shorts last week on the CME and now perhaps wary of adding to this stance ahead of Sunday’s referendum. Month-end and quarter-end add to the difficulty of trading EUR at the moment, with liquidity likely to be thinned by those opting to stand aside.”

The demand for safe havens such as Swiss franc and yen was on the rise in Asia as markets gear up for further Greece updates ahead of today’s IMF repayment deadline. The Antipodeans were heavily offered on weaker domestic economic releases while a broadly stronger US dollar also kept a lid on the OZ currencies.

(Market News Provided by FXstreet)