Greece Back In Focus
USDJPY held onto last week’s gains, despite Japan’s return from a week-long holiday. The pair even set a new 5-week high of 79.66 before settling back down again. Flow was light however with most of South East Asia and the Middle East on holiday. Fed Chair Bernanke’s Jackson Hole speech is still over ten days away and, as such, the August FOMC minutes due on Wednesday are likely to be the next major directional trigger for the yen. We expect Greece to swing back onto investors’ radars this week too as Greece’s Prime Minister Samaras is due to meet Germany’s Chancellor Merkel and France’s President Hollande on Friday, where the question of granting a 2-year extension to Greece’s austerity program is bound to be discussed. Merkel and Hollande are due to meet alone the day before. We doubt however that any firm decisions will be announced until the troika has concluded its latest quarterly review in late September. Weekend press reports indicate that France wishes to show leniency to Greece as a price worth paying to hold the Eurozone together. Germany however still sounds largely uncompromising − although the latest language suggests room for compromise. For example, German Foreign Minister Westerwelle said Germany would not consider easing the “substance” of the reforms already agreed. Germany’s Finance Minister Schaeuble added “it is not responsible to throw money into a bottomless pit…we cannot create yet another new program”. Data flow in the US remained moderately upbeat on Friday with the University of Michigan consumer sentiment index rising above consensus to 73.6 in early August, and the index of leading economic indicators rising by 0.4% (cons. 0.2%). Data releases are limited today – although a EUR 3.2 bn Greek sovereign bond is due to mature. Greece raised over EUR 4 bn last week at a bumper T-bill auction, so repaying the maturing bond today should be just a formality.
Click here to read the full report: UBS Morning Adviser Europe
UBS Investment Bank