Athens Talks In Focus
All eyes were back on Athens over the weekend as crunch talks on the Greek debt swap and the next aid tranche were being held. As of writing, it appears the problems lie with the latter as Greece’s national unity government has failed to reach an agreement on further savings to satisfy the Troika’s demands. So far, Greece’s requests for an easing of the terms seem to have been comprehensively rebuffed, but discontent amongst the political parties is growing, amidst warnings that Greece is unable to accomplish any more austerity. The latest reports suggest that the Greek government will have until noon Monday to respond to the Troika’s demands, and Greek Prime Minister Papademos has warned that the country’s partners in Europe is starting to run out of patience. On the debt swap, there appears to be very limited new information, but the IIF’s representatives are currently in Athens pursuing an end to negotiations. How to secure contribution from official-sector creditors is still in question, as opposition from various quarters remains strong. We believe the week ahead will be extremely significant for event risk and headlines could become a dominant driver for the euro. The ECB will also meet on Thursday, but key matters may have moved beyond their control by the time the Governing Council meets. Otherwise, the market is at least still managing to find some comfort from economic figures. US payrolls surprised strongly to the upside on Friday, with 243k jobs added in January (cons. +140k) and the unemployment rate fell to 8.3%. Our economists have now upgraded their outlook for Q1 GDP from 1.5%y/y to 2.3%y/y, and our year-end unemployment rate forecast has been revised to 7.9% from 8.6% previously, though we note that the decline in labour force participation has contributed to the decline. Ahead on Monday retail sales are due in Australia, and Germany releases Factory Orders figures. The ECB, BoE and RBA are all meeting on policy this week, and the BoE is expected to decide on an expansion in the asset purchase programme. Friday, EURUSD traded 1.3066-1.3206 and USDJPY 76.12-76.74.
Click here to read the full report: UBS Morning Adviser Asia
UBS Investment Bank