As expected yesterday’s Eurogroup finance ministers meeting yielded the outcome that most people thought it would and broke up with no new progress and quite a downbeat mood, amongst EU officials.
Greece’s finance minister did submit some new proposals, but they don’t appear to have been enough to satisfy EU creditors, while German Chancellor Angela Merkel reiterated the line of no reforms, no money.
IMF chief Christine Lagarde
also stated that there would be no deadline extension beyond the 30th June for Greece’s €1.5bn payment
. All the while Greek savers continue to pull money out of the banks with over €2bn leaving this week alone.
As a result reports started circulating yesterday that the ECB was concerned that Greek banks might not be able to reopen on Monday,
due to how quickly money was flowing out, a claim that was denied, but as the pressure continues to ratchet up it would appear that Greece’s cash flow problem is getting worse as recent data shows that tax revenues collapsed in May.
As a result it would appear a new meeting this time for EU leaders has been scheduled for Monday, in Brussel
s, no doubt to assess the next steps, and try to come to a deal, though we may have to see another deadline extension if a deal is done.
Despite all these concerns no-one appeared to have told the markets which saw the euro continue to remain firm, while European markets rebounded as well,
helped along in no small part by strong gains in US markets, and we could well see a higher open today.
The Fed’s dovish outlook appears to have relit a fire under US equities
sending the NASDAQ to a new record and the US dollar sharply lower against a basket of currencies, after the May CPI data came in weaker than had been expected. With inflation continuing to remain subdued the Fed will be in no hurry to raise rates, particularly with headline CPI at 0%, well below its 2% target.
As far as today’s market action is concerned there have been reports that the ECB may have to increase the ELA further at an emergency meeting to be held today
, to keep the Greek banks solvent. The ECB won’t want to be accused of precipitating a default before 30th June, while talks are ongoing.
On the data front after some fairly positive UK data for most of this week and the pound hitting its highest levels against the US dollar since November, we have the latest public finance numbers for May.
This is one area that the Chancellor is keen to keep in check, and with an emergency budget in a few weeks is one area that will get a lot of market attention in the weeks to come. We could well see an increase to £10bn, from £6.8bn in April.
– yesterday’s move through the 1.1380/90 level has brought us closer to the May highs at 1.1460/70, which remains a key resistance level along with the 1.1500 area. Support remains all the way back at this week’s low between 1.1200 and 1.1220.
– yesterday saw the pound hit its highest levels since November last year at 1.5930 pushing above 1.5875 the 50% retracement of the down move from last year’s high at 1.7190 to the lows this year at 1.4565, and the 200 week MA. A weekly close above here targets a potential move to 1.6180. Only a fall below the 1.5400 level suggests a move back towards trend line support at 1.5320, from the lows this year at 1.4565.
– the euro continues to decline having failed to push above 0.7250 earlier this week, which suggests the possibility of further weakness towards the 0.7080 level. Only a move back through 0.7250 argues for a return towards 0.7300.
– the US dollar retested the neckline support break out from last week at 124.40 but was ultimately unable to push beyond it before sliding back. The bias therefore remains for a move towards 121.80, on a break below 122.50.
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