Greek Deal Is Done
EURUSD surrendered some of its overnight gains on the confirmation of an 85.8% participation rate in the Greek PSI deal. This effectively rules out the worst-case scenario – a disorderly default. Yet, a question relating to a potential credit event in Greece has already been submitted to, and accepted by, the ISDA Determinations Committee, which will meet at 1300 GMT today. Regardless of what transpires on that front, it still looks as if CACs will be invoked, likely triggering CDS in the end anyway. Further details should emerge when Eurozone finance ministers hold a teleconference at 1300 GMT. The IMF noted that while the risk of an acute Eurozone crisis has been temporarily avoided, the Fund is waiting for a bigger firewall to be implemented ahead of its executive board meeting scheduled for March 15 to decide how much to contribute to Greece’s second rescue. AUDUSD initially retreated on the back of the AUD673 mn Australian trade deficit surprise for January – but quickly rebounded on the view that the deficit was a ‘one-off’. Also supporting the Australian dollar was China’s 3.2% y/y February CPI, which undercut the 3.4% y/y consensus estimate. This will fuel hopes of further monetary easing in China, including an imminent RRR cut, though our Chinese economics team warns against putting too much weight on one soft CPI print. AUDJPY demand from Japanese investors and importers, continued jawboning from Japanese officials, plus expectations of a solid US payrolls result for February later today (the 210k consensus exceeds the 190k UBS estimate) all served to underpin USDJPY, which is eyeing the 82 level. EURUSD traded between 1.3224-1.3278 today, with USDJPY at 81.47-81.89.
Click here to read the full report: UBS Morning Adviser Europe
UBS Investment Bank