New Deadlines For Greece
Despite the lack of fresh news out of Greece markets were willing to overlook this week’s round of negative headlines and push the euro higher. Risk also got a boost from strong US Consumer Credit numbers. Late into the session a Greek government spokesperson finally announced that political leaders would meet on Wednesday to respond to the bailout proposals by noon. Softer growth figures out of Germany failed to dent the euro either, though Wednesday’s trade data may prove a sterner test of the currency’s resilience as external demand will be taken into account. We expect more details to surface on Wednesday on how Greece is going to proceed on the bailout and the PSI, but all parties involved must realise that the clock is ticking, and with each passing hour the odds of some destabilising unilateral step will rise. Separately, there was some interest in the franc’s performance today as EURCHF rallied sharply ahead of a planned speech by SNB Board Member Thomas Jordan. His comments were a restatement of the SNB’s resolve on defending the floor, but we note that Jordan has tried to cover as many corners as possible by stressing intervention to defend the 1.20 level, explicitly, will be conducted around the clock, especially during periods of illiquidity. These remarks can be regarded as a clarification of the SNB’s overall intervention strategy, and may serve as a strong enough deterrent to fresh EURCHF shorts, especially in the current risk environment. We continue to hold a December expiry EUR call/ CHF put as a trade recommendation, targeting further deterioration in the franc,
either through a rise in the floor or natural price action. Switzerland releases unemployment figures on Wednesday but the market is not looking for any rise in the jobless rate. Headline risk will likely remain strong through the end of the week and there is still no guarantee that relevant assurances from the stakeholders in Europe will be obtained. This
could even complicate the ECB’s response strategy on Thursday, especially as the market is looking for more details on its participation in the debt swap. Latest reports suggest the ECB is willing to swap Greek bonds with the EFSF, but won’t take any losses. EURUSD traded 1.3090-1.3270 and USDJPY 76.54-76.95.
Click here to read the full report: UBS Morning Adviser Asia
UBS Investment Bank