Data Weakens AUD, NZD
Both AUD and NZD fell after a pair of disappointing domestic data releases. Unusually, the euro carried on regardless and further consolidated its recent gains. The possibility of a deal between Greece and private sector bond holders appears to be growing, according to the Financial Times. Our house view that coercive measures may be needed further down the line remains unchanged. The news comes on the back of the IMF’s proposal for a fresh $500bn funding call, which would be a significant boost to the funds’ resources. Whether Largarde’s call for new one-off contributions obtains much buy-in from non-Eurozone nations remains to be seen, but the momentum clearly matters for risk and the euro. EURUSD traded 1.2835-1.2879 and USDJPY 76.69-76.85 during the Asia session, while acceptable US data also helped equity markets finish yesterday on a more buoyant note. Industrial production was slightly softer than expected at +0.4%m/m, while PPI registered a decline of 0.1%. TIC data showed a rise in long-term capital flows into the US, and we expect such trends to remain a source of structural support for the dollar. Ahead on Thursday, the US releases CPI data. Price figures may attract more attention in the US in the short term as there is talk of an explicit inflation target being adopted by the Federal Reserve.
Click here to read the full report: UBS Morning Adviser Europe
UBS Investment Bank