Greek Parliament Approves Budget
The Greek parliament approved the 2013 budget by a majority of 167 votes to 128, but EURUSD got very little support from this afterwards. One government deputy (from New Democracy) was expelled for voting against party lines, but two former government deputies who had been ejected from their respective parties on Wednesday chose to vote in favour this time around. The positive outcome clears another hurdle to eventual disbursement of the next tranche of external aid, but it seems unlikely that Eurozone finance ministers (who meet later on Monday) will be ready to approve the release of the cash so soon. Nevertheless we do expect to hear progress on this front over the coming days – after all, a EUR 5bn Greek bond is due to mature on Friday which should help concentrate minds and inject a dose of urgency. In any event, it seems very unlikely that a default will be allowed to occur given the maturing bond is held by the ECB and Greece is already scheduled to issue a total of EUR 3.125 bn in 1m and 3m T-bills on Tuesday to help raise most of the required cash. Over the weekend, China’s trade balance for October beat consensus estimates, boosted by accelerating export growth. We would caution against buying AUDUSD on the back of this release however given the detail was far less encouraging. The value of iron ore imports fell 21% m/m and has dropped back to levels unseen since Feb 2010. This keeps us long-term bearish on the Australian dollar but we are patient given time is on our side − our downside AUDUSD option trade recommendation still has four months to run to expiry. Elsewhere, Moody’s announced overnight that the Aaa rating on the US would be maintained even in the event of the economy going over the fiscal cliff. Longer term though, the agency warned that a credible timetable for reforms would be needed to avoid a downgrade.
Click here to read the full report: UBS Morning Adviser Europe
UBS Investment Bank