Fitch Turns Pro-Growth
The US holiday on Monday made for quiet trading conditions in Asia overnight, however the Australian dollar was supported by rising expectations of a growth-supportive policy response from China. Meanwhile Fitch warned that Eurozone sovereign ratings are not likely to see stability “anytime soon”. The agency also recommended that governments adopt growth measures as austerity “in many cases” has added downward pressure to ratings. Investor focus remains on Greece although there is still almost three weeks to go before the June 17 re-election. Despite a barrage of newspaper commentary suggesting multi-national corporations are rethinking their business interests in Greece, there was at least some news of a positive variety too – newswires reported that (1) Greek banks have finally received the promised EUR 18 bn in fresh capital and (2) that Greece still has access to a residual cash reserve which could be used to provide funds in the near future if necessary. The capital injection does allow the banks in question to return to traditional ECB funding channels at least, though there will continue to be some ongoing liquidity provision via the ELAs which is a key point of contention for the Bundesbank in particular. Our flow monitors suggest that asset managers, though still on the offer, have slowed down their pace of selling in euros but this would all prove academic if there were material developments which would point to a Greek euro exit. Overnight EURUSD traded 1.2510-1.2548 and USDJPY 79.42-79.64.
Click here to read the full report: UBS Morning Adviser Europe
UBS Investment Bank