Meetings Disappoint
EUR lost against its peers as the ECOFIN meeting concluded on Tuesday without any major developments on either the Greek or the Spanish issues. Investors shunned risk assets and JPY and USD gained across the board. Spanish 10y yields rose by about 10bp after German Finance Minister Schaeuble rehashed his earlier stance that the ESM treaty does not cover legacy assets. Schaeuble also noted that Greece has not fulfilled its obligations yet and that there is a “broad skepticism” on the issue of official sector accepting haircuts on Greek debt. EU Economic and Monetary Commissioner Rehn indicated that a decision on Greece can be expected latest by November. The press conference of German Chancellor Merkel and Greek Prime Minister Samaras was largely in line with expectations with Samaras pledging to implement reforms and stay in the Eurozone and Merkel saying she will wait for the Troika report before making a decision on Greece. Samaras noted that the issue of extending the deadlines for Greece was discussed with Merkel but refused to give any details. EURUSD fell by about 80 pips overnight. GBPUSD came under pressure for a third consecutive day falling below the 1.60 level during New York hours. BoE Governor King noted that the UK faces a slow and difficult recovery and that output will not return to pre-crisis trend for some time. He added that it may be “justified to aim off” the inflation target under some circumstances, fueling expectations of further QE in November. Ahead today, Nordic countries will be in focus with August industrial production data due in Sweden and September CPI due in Norway.
Click here to read the full report: UBS Morning Adviser Asia
UBS Investment Bank