Baku, Azerbaijan, June 17
The market is waking up to fresh Greece worries as there was no further progress over the weekend in Brussels, and as the clock ticks ever louder into the end of this month in just over two weeks, John Hardy, head of foreign-exchange strategy at Saxo Bank said in his foreign currency market review.
“The latest hope is that the Eurogroup meeting of finance ministers scheduled for June 18/19 will break the logjam in negotiations, but should we really expect something here or will Tsipras and company take things to the wire ahead of the June 30 deadline for its next International Monetary Fund repayment? Or beyond?” Hardy said in his review.
Today’s economic calendar provides a couple of second-tier data points from the US this week and not much else ahead of June 17 through June 19 that offers three days more heavily populated with event risks, according to Hardy.
“Federal Open Market Committee meeting scheduled for June 17 is the most obvious highlight, though the market doesn’t seem to be holding its breath in anticipation of anything dramatic from the Fed,” said the review.
This is possibly a justified stance, but it leaves the market very open to any surprises, particularly to the hawkish side, the author said.
This will be a meeting with fresh Fed economic and policy projections and a press conference led by Fed chair Janet Yellen.
Four central bank meetings take place this week (FOMC on June 17, SNB and Norges Bank on June 18 and BoJ (Bank of Japan) on June 19).
Foreign currency review:
USD: USD picture is a bit mixed ahead of FOMC, as the market is unwilling to believe that the Fed wants to inject any drama at this juncture, according to the review. The thinking is that second quarter data thus far looks encouraging, but no sufficiently so for the Fed to adjust expectations higher, said the author. “I suspect risks are to the hawkish side, but more because of market complacency than because the statement/projections/Yellen will say anything aggressive,” said the expert of Saxo Bank.
EUR: Greece, Greece, Greece. The market is extremely tired of this issue and is unwilling to trade the headlines at this point judging from the price action, according to the expert. “But look at implied volatilities in options and we can see that the market is looking for an explosive move once any kind of clarity emerges,” said the article. “The main initial focus will be on whether the smoke clears at the Eurogroup meeting of finance ministers on June 18/19.”
GBP: “Over-performing relative to interest rate spreads, against the US dollar – but let’s see if the BoE (Bank of England) has anything to say on June 17 that moves the market’s assessment of the BoE’s thoughts on its first rate hike,” said the article. “With UK core inflation at 14-year lows, what’s the rush?”