Forex News

Uncertain US growth trumps Greek debt concerns EU leaders continue to discuss further financial support for Greece with, according to yesterday’s Financial Times, demands for more direct international involvement in Greek economic policy, including influence over measures for tax collection and the privatization of government assets.

EUR USD (1.4380) A view of the eurozone in terms of risk presently reveals a rather jagged topography. In Italy the country’s economic growth is faltering, and Spain braces itself for contagion risk as it seeks to launch €3.5bn in two bond auctions on Thursday.

1.4340-50 breaks under the strain After a quiet day yesterday due to various Holidays, the key 1.4340-50 level in EURUSD was finally breached overnight in Asia, triggering stops and some early European buying.

Soon some healthy REAL MONEY inflows on the open here…USDTWD Macro adding to USDRUB shorts (via options too)

Turkish trade deficit reached USD 9.1bn in April vs. expectations of 9.8bn. The deficit is 64% higher than in April 2010.

News HU: Neutral – Government, banks announce action plan to save FX borrowers -in line with expectations (no agreement on bank tax) (p2) RU: Mixed – CBR hikes O/N depo rate by 25bp, leaves all other rates unchanged (p2) TK: Mixed – CBT says it reduces daily FX purchase auction to USD40mn from USD50mn (p1)

Overnight equity markets Nikkei          +1.91%          9’686.93 S&P500          +0.0%           1’331.10 Dow             +0.0%           12’441.58 Nasdaq          +0.0%           2’796.86

G10 Currencies EUR-USD: With a bank holiday in the US and the UK and due to a lack of news on the debt front EUR-USD traded sideways yesterday. This was however not more than a short breather.

Foreign Exchange EUR/USD – 1.4320/65 key near term, outlook neutralising. US dollar index remains negative below the 76.55 down channel GBP/USD – Outside week to the topside – unable to rule out upside probes.

EUR USD (1.4270) Commentators are abuzz over a Financial Times report this morning which says that European leaders are negotiating severe bailout terms for Greece, including international intervention in tax collection and the relinquishment of state assets in exchange for more relief money.

We recommend going short EUR-GBP at current levels and selling a 2 month 0.835/0.9 EUR-GBP strangle.