Merkel Fills Her Diary
As politicians return from their summer vacations, German Chancellor Angela Merkel wasted no time in arranging another leaders meeting with French President Hollande for talks and dinner on Aug. 23. This will precede a Samaras-Merkel meeting on Aug. 24, and a Samaras-Hollande meeting on Aug. 25, so the topic of discussion is quite clear. While some urgency in decision-making has probably been lost during the summer lull and promise of action from the ECB, the structural problems surrounding Greece are unlikely to go away any time soon and the next source of market tension probably lies with this. The sell-off of US Treasury securities finally came to a halt overnight, though USDJPY has tentatively pushed higher but we expect current levels to consolidate in the absence of any positive data-related spikes in US yields which take them above the crucial 1.86% level, particularly with next week’s FOMC minutes quickly approaching. The overnight session produced little in the way of fresh news, although AUDUSD fell 30 pips after Australia’s Treasury rejected the idea of FX intervention as a means of weakening the Australian dollar – on the grounds that it would be ineffective and potentially destabilising. Instead, the Treasury made it clear that if the currency were judged to be too strong, interest rate cuts could be used to induce weakness. This selling gained momentum in the European session despite a relatively neutral risk environment elsewhere. Ahead today, the July CPI report in Canada is due, along with the Univ. of Michigan confidence survey.
Click here to read the full report: UBS Morning Adviser America
UBS Investment Bank