Oroscope

EUR was heavy first thing in early Monday Asian trade with a variety of negative headlines and a typically vague statement from the G-7 helping trigger stops and push EUR/USD to a low of $1.3550 with EUR/JPY slumping to 104.90. After a brief period of respite, some modestly hawkish comments from the PBOC (see AUD) leant on the commodity currencies and kept the mood generally cautious. Liquidity has not been great given the holidays in China, Korea and Taiwan. The DXY is up to 77.50 from a NY close of 77.20, S&P futures are down 1% and USTs are cheaper by 1-1.5bps. EUR: News over the weekend seemed mainly to be a continuation of Friday’s themes. Several news agencies were reporting that Germany is preparing for a possible Greek default with the head of the CDU’s junior coalition partner, the FDP, quoted as saying debate should include “if necessary, an orderly bankruptcy of Greece”. The Greek government, meanwhile, announced a €2.0bn property tax (applied to electricity bills – so presumably avoiding this will be difficult) to cover a fiscal gap of the same magnitude.

EU Economic and Monetary Affairs Commissioner Rehn appeared to give it the tick of approval (“I welcome the expressed commitment…”) and the disbursement may thus be forthcoming presuming the measure is supported by the Greek Parliament. Elsewhere, support for Germany’s proposal to replace Stark with Asmussen at the ECB seems to be growing with the Dutch adding their approval alongside the Eurogroup’s. With some poor technicals lining up with a continual stream of negative headlines EUR has been friendless.