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Dollar Aims Higher on Greece Jitters, Eurogroup Meeting on Tap Ahead

By , Currency Strategist
14 May 2012 08:05 GMT

Talking Points

  • US Dollar Aims Higher as S&P 500 Stock Index Futures Point to Risk Aversion
  • Greek Government Impasse Overshadows China’s Weekend Interest Rate Cut
  • Eurozone Finance Ministers’ Meeting, Italian and Spanish Debt Sales Key Ahead

The US Dollar pushed higher to start the trading week as stocks fell in overnight trade, driving demand for the go-to haven currency. The MSCI Asia Pacific regional benchmark equity index fell 0.6 percent as Greek lawmakers failed to come up with an agreement on a ruling coalition at meeting over the weekend. Traders are concerned that a lingering impasse will push Athens to fall short of its obligations under the terms of the EU/IMF bailout, paving the way for Greece’s ejection from the Eurozone and possibly even the overall EU.

This would be an unprecedented development with effectively unpredictable practical implications for financial markets, fueling a broadly defensive tone and overshadowing risk-supportive news of a Chinese rate cut. Beijing announced over the weekend that reserve requirement ratios (RRRs) will be cut 50bps to 20 percent effective May 18. The move could have been expected to boost risk appetite and drive stocks-linked currencies higher on hopes of better-supported growth in the world’s second-largest economy were it not for Greek-related headwinds.

Looking ahead, S&P 500stock index futures are pointing sharply lower, hinting risk aversion is likely to continue driving the greenback higher against most of its leading counterparts. The spotlight is on a meeting of Eurozone Finance Ministers in Brussels, with traders on the lookout for any clues about a possible way forward beyond the Greek stalemate. Italy and Spain are also due to issue debt, with markets keeping a close eye on average yield and bid-to-cover readings to gauge the extent to which Athens-born jitters are spilling over elsewhere.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

22:30

NZD

Performance Services Index (APR)

56.7

-

54.2 (R+)

22:45

NZD

Retail Sales Ex Inflation (QoQ) (1Q)

-1.5%

-0.5%

1.8% (R-)

23:50

JPY

Loans & Discounts Corp (YoY)

-0.4%

-

0.2%

23:50

JPY

Domestic CGPI (MoM) (APR)

0.3%

0.1%

0.5% (R-)

23:50

JPY

Domestic CGPI (YoY) (APR)

-0.2%

-0.3%

0.5% (R-)

1:30

AUD

Owner-Occup. Value of Loans (MoM) (MAR)

-0.3%

-

-4.1% (R-)

1:30

AUD

Home Loans (MoM) (MAR)

0.3%

-2.0%

-2.5%

1:30

AUD

Investment Lending (MAR)

-1.0%

-

4.3% (R-)

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

6:00

EUR

German Wholesale Price Index (MoM) (APR)

-

0.9%

Low

6:00

EUR

German Wholesale Price Index (YoY) (APR)

-

2.2%

Low

6:45

EUR

France Current Account (€) (MAR)

-

-5.3B

Low

7:15

CHF

Producer & Import Prices (MoM) (APR)

0.2%

0.3%

Low

7:15

CHF

Producer & Import Prices (YoY) (APR)

-2.1%

-2.0%

Low

8:00

EUR

Italian CPI (NIC incl. tobacco) (MoM) (APR F)

0.5%

0.5%

Low

8:00

EUR

Italian CPI (NIC incl. tobacco) (YoY) (APR F)

3.3%

3.3%

Low

8:00

EUR

Italian CPI – EU Harmonized (MoM) (APR F)

0.9%

0.9%

Low

8:00

EUR

Italian CPI – EU Harmonized (YoY) (APR F)

3.8%

3.8%

Low

8:30

EUR

Spain to Sell 364-518 Day Bills

-

-

Medium

8:30

EUR

Italian General Government Debt (€) (MAR)

-

1928.2B

Medium

9:00

EUR

Italy to Sell 2015-2025 Bonds

-

-

Medium

9:00

EUR

Euro-Zone Industrial Production (YoY) (MAR)

-1.4%

-1.8%

Medium

9:00

EUR

Euro-Zone Industrial Production (MoM) (MAR)

0.4%

0.5%

Medium

15:00

EUR

Euro Zone Finance Ministers Meet in Brussels

-

-

High

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.2821

1.2948

GBPUSD

1.6003

1.6128

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow me on Twitter at @IlyaSpivak

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14 May 2012 08:05 GMT