Greece’s odyssey pauses as the EU and IMF agreed to a plan in order to unlock bailout funds to Greece. Meanwhile, Eurozone is on a positive inflation again after six months, driving bond yields higher that caused a substantial drop to the dollar. The Fed dovish comments also added to the dollar slump. OPEC meeting, which is scheduled to take place today, will be closely eyed from market participants to decipher further indications on oil prices.
[B]Euro surged on a Greek draft agreement[/B]
The demand for the[B] shared currency[/B] increased sharply after the announcement that [B]Greece reached an initial agreement[/B] with Eurozone and IMF to unlock bailout funds for Greece. Greek Prime Minister Alexis Tsipras on behalf of the Greek government submitted a new plan as the final offer before the country’s default is a deadlock. The country’s creditors agreed to the plan, avoiding the first bankruptcy in history for a member-state of the European Union.
[B]Eurozone’s deflation ended[/B] but the fear to slip back did not fade yet and the stimulus bond-buying program is still needed. The Preliminary CPI for May came out 0.3% yoy above expectation to have increased by 0.2% from zero in April. The [B]Core CPI[/B] recorded a[B] nine-month high[/B] as the CPI ex food costs and energy prices estimated to have accelerated by 0.9% in May.
Amid the Greece’s recession and Eurozone’s race to stimulus the economy, [B]Germany’s labor market[/B], the biggest economy in Europe, [B]break the records of how strong can be[/B]. The seasonally adjusted unemployment rate in May came out in line with the expectations at 6.4%. The indicator remains below 7% since September 2011 and declines gradually ensuring that Germany has the lowest unemployment rate in Europe. The last time the German unemployment rate have seen to edge higher was in the start of 2009. The Unemployment Change increased to -6,000 despite the market consensus to have decreased to -10,000 from -9,000 before. However, is below zero indicating a decrease in the number of unemployed people.
[B]EUR/USD[/B] rose modestly on Tuesday reversing its previous week losses as currency traders trusted the euro again since the Grexit was avoided on the back of an initial agreement between Greece and its creditors. The single currency surged above the psychological levels of 1.10 and 1.11 as well as above the 200-period SMA on the 4-hour chart. Now, resistance is seen at the 1.1220 level with a cut through here opening the door for more upside towards the 1.1300 level. Conversely, support lies at the 1.1070 level where a violation will aim at the 1.1.0980 level.
[B]USD losing ground on EU good news[/B]
The[B] greenback[/B] suffered a huge selloff on Tuesday’s trading session after the [B]U.S. and Germany bond yields[/B] settled near the highest level of the year while an FOMC voter appeared less optimistic on the US economic growth. After Greece announced an initial deal with its creditors and Eurozone’s CPI rose by 0.3% the bond yields jumped, driving to a significant selloff.
[B]Fed governor Lael Brainard[/B] said that the reason for the recent weakness in US economic data is not only the bad weather and a rate normalisation will delay as the USD continues to be strong. However, she believes that a first rate hike in the current year is possible.
In the rear of that, the market expect the [B]NFP report[/B] on Friday to pick up to 227K jobs in May from 223K before but traders are still reticent with their USD trades.
[B]OPEC meeting in focus[/B]
[B]Organization of Petroleum Exporting Countries[/B] meeting is scheduled for today and will attract considerable attention after the last OPEC meeting in November, when the members decided to keep the production unchanged instead of restrict the output and the oil prices dropped to a six-year low! The [B]current oil prices [/B][B]are 40% below[/B] the last year’s and there are countries that ask for further decreases. OPEC Accounts are related for more than a third of the world’s oil, including natural gas liquids and condensates. The OPEC, in order to restore the stabilization in the market, [B]may force the oil prices to pick up back[/B].
[B]Pound mixed vs G10; GBP/USD surged[/B]
The [B]sterling [/B]was traded mixed on Tuesday’s and early Wednesday’s trading sessions despite the few upbeat economic data from UK. The Pound increased only against the US dollar and the Japanese Yen from the major currencies, remained virtually unchanged versus the Canadian dollar and the New Zealand dollar while it depreciated against the other G10 currencies. The [B]UK Construction PMI [/B]for May increased to 55.9, beating expectations to have increased at 55.0. The [B]Mortgage Approvals[/B] for April elevated more than anticipated to 68.08K from 61.94 before, a positive sign for the housing sector.
The pound rose against the greenback on the back of a weaker dollar, as the US trading session brought overall weakness to the buck. The [B]GBP/USD[/B] bulls halted a seven negative days in a row after rebounding from the strong support level of 1.5180, which includes the 50-period SMA on the daily chart. The pair was likely to find support at the latter level, Monday’s low and support at 1.5160, the low of June 01. On the upside, the 200-period is ready to provide a significant support around the psychological level of 1.5400. In the 4-hour chart, the price is finding a strong resistance from the 200-period SMA whilst the technical indicators have also turned lower, but remains above their mid-lines, giving not much clues on what’s next for the pair, considering also the aggressive buy above the 1.5100 as well as ahead of the BoE and US NFP report due on Friday. As commented on previous updates, the price needs to firm up above the psychological level of 1.5500 to be able to post more sustainable gains and to turn more bullish, whilst below the latter the risk turns towards the downside.
[B]Gold returned below $1,200[/B]
[B]Gold [/B]returned slightly below the psychological $1,200 level driven by the weaker dollar and value-buying. As we said to the previous reports, I would expect the precious metal to remain in strong demand, as long as it remains below the latter level, however, the only thing that keeps the gold from surging higher is the strong dollar. The appreciating dollar makes dollar-denominated gold expensive. The broadly positive reports pressured gold prices below the $1,200 level the last couple of weeks came on the back of the Federal Reserve, which market participants thought that the Fed would raise interest rates sooner than expected. Therefore, the $1,200 will be a key for the gold bulls.
[B]U.S. Dollar Index[/B]
The [B]ICE U.S. Dollar Index[/B] started the first days of June with losses. The DXY fell 1.49% on Tuesday’s trading session further to the USD losses against a basket of currencies. The index’s losses for June total to -1.12% but this can be easily reversed on a strong NFP report.
[B]U.S. Indices[/B]
The U.S. stocks closed slightly lower as Greek talks found an end and the traders expect the headline number of the Non-Farm Payroll report on Friday. The[B] Dow Jones Industrial Average [/B]dropped 28.43 points (0.16%) to 18,012. The companies’ stocks that recorded the major losses were Intel Corp (NASDAQ: INTC) with losses of -1.86% and UnitedHealth Group Inc (NYSE: UNH) with -1.78%. The broad-based [B]S&P 500 [/B]dipped 2.13 (0.10%) to 2,110 while the tech-rich [B]Nasdaq Composite Index[/B] gave up 6.40 (0.13%) at 5,077.
[B]Economic Indicators[/B]
Today, early in the European morning, the Markit Services PMI for Germany, Italy, Spain, England and Eurozone for May are expected. Italy’s unemployment rate for April is scheduled. In Eurozone, Unemployment Rate for May and Retail Sales for April will be released. European Central Bank, slightly after the announcement for its Interest Rate Decision will release its Monetary Policy Statement accompanied with a Press Conference which would be the first spotlight of the day. [B]OPEC meeting[/B], Organization of the Petroleum Exporting Countries, scheduled to take place will be closely watched as the [B]member-countries will discuss the oil price level.[/B]
In US, the [B]ADP Employment Change [/B]will be the second spotlight of the day as the ADP Employment Change will be released two days ahead of the NFP report. The US Markit Services and Composite PMI along with the ISM Non-Manufacturing PMI will be out.
Later in the European night, Australia Bureau of Statistics will reveal April’s Trade Balance, Retail Sales, Imports and Export transactions change.
