Greece Still In Focus
The Australian dollar started the Asia session on a weak note, after news of a trading loss at a US bank sent S&P futures lower. The euro also came under significant downside pressure later, falling to a new three-and-half-month low against the dollar and eventually bottoming out at 1.2905. There was no obvious euro-negative headline behind the move however. In fact, hopes continue that PASOK leader Venizelos will be able to forge a coalition with the New Democracy and Democratic Left – an arrangement that would command a majority of 168 of 300 seats. Last night Democratic Left party leader Kouvelis publicly approved of the idea of a unity coalition government. Though pro-euro, the Kouvelis is opposed to the bailout agreement so even if a government can be formed, a showdown with the EU/IMF seems likely. Moreover, an unnamed PASOK official’s comment that SYRIZA must be involved in any ‘national unity’ government suggests this is not a done deal. The fact that SYRIZA is still in the mix probably reflects its growing public popularity. Indeed, according to the latest public opinion poll (by MARC SA), SYRIZA is leading the pack (24%) ahead of New Democracy (17%), PASOK (11%), the Independent Greeks (9%), KKE (6%), and the Democratic Left (4%). Norges Bank left rates at 1.50% as expected, with the statement noting “weak growth prospects in Europe and a strong krone are holding down inflation at a low level and restraining growth among Norwegian companies exposed to international competition”. Elsewhere, the BoE left both the policy rate and asset purchase programme unchanged, and while sterling initially rallied on the announcement, there was predictably little follow-through. USDJPY is also slightly firmer, with the US initial claims print (down to 367k from 368k), US trade data (implying very little revision to Q1 GDP growth) and Fed Chair Bernanke (who basically confined his comments to banking sector issues) offering nothing new for the doves.
Click here to read the full report: UBS Morning Adviser Europe
UBS Investment Bank