The price action overnight was largely driven by a better-than-expected China PMI which gave AUD a modest but temporary boost. The euro meanwhile remained under downward pressure as investors digested yesterday’s news reports suggesting Greece is resisting further austerity measures to bring debt down to sustainable levels, and that negotiations on this front are likely to make slow progress. This is a timely reminder that the proposed bond swap is just one element in a broader deal that must be agreed in full if Greece is to secure fresh funding through a second rescue package. Despite the latest headlines – which are undoubtedly a cause for concern – there is still time for a grand deal to be forged and this could eventually precipitate a risk rally. But eventual success will require delicate negotiations on a number of matters where political realities may collide with financial necessities. Elsewhere, US data ran into some speed bumps as the Chicago PMI came in weaker than expected, albeit at resilient levels. Ahead on Wednesday, manufacturing PMI numbers will be released globally and investors will be hoping for stable growth to compensate for jitters coming out of the sovereign debt front. EURUSD traded 1.3045-1.3093 and USDJPY 76.15-76.31.
Click here to read the full report: UBS Morning Adviser Europe
UBS Investment Bank