Euro Drags Risk Lower
The euro came under pressure amid uncertainty over the Greek PSI deadline. The Greek debt agency chief confirmed that the deadline remains March 8 but investors were not particularly consoled by the comments. A PSI deadline delay is certainly plausible if they find that take up is not even large enough to enact the CAC’s, one option would be to go back to parliament and amend the law to get a lower threshold. However, the official line so far remains that the deadline is March 8. The ‘risk off’ tone started in Asia, with AUD and NZD coming under pressure, and the dollar buying continued against other currency pairs in the European session. The RBA kept policy rates on hold overnight, broadly in line with market expectations. The better-than-expected start to the year globally has probably given central banks in general more room for manoeuvre, but our economists note that the RBA has maintained a weak easing bias and is sounding more neutral at this stage – further policy projections will be contingent upon the employment situation, but for now there doesn’t appear to be a strong case to move. More generally the market may be responding adversely to the growth targets set by China at this week’s NPC session, but given that the forecasts have been well choreographed in advance the moves seem to be a bit excessive. Oil prices remain a concern, but they are probably not at levels yet warranted to demand early policy action, or to destabilise growth.. Overnight EURUSD traded 1.3131-1.3231 and USDJPY traded 80.79-81.59.
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UBS Investment Bank