News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
EUR/USD
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Bullish
Wall Street
Bearish
Gold
Bearish
GBP/USD
Mixed
USD/JPY
Bearish
More View more
Real Time News
  • Indices Update: As of 20:00, these are your best and worst performers based on the London trading schedule: Germany 30: 0.39% France 40: 0.32% FTSE 100: 0.26% US 500: 0.01% Wall Street: 0.01% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/ljSeRVDbh8
  • Gilead Sciences receives FDA approval for Remdesivir - BBG
  • $GILD | Gilead Sciences receives FDA approval for coronavirus treatment remdiesivir
  • https://t.co/WnuPTDjq0J
  • Can bulls continue to push? While the bullish theme in Gold remains on hold, buyers haven’t been so bashful around Bitcoin. Get your $btc technical analysis from @JStanleyFX here:https://t.co/yLoAnTe6Py https://t.co/HD2spNq4FC
  • Precious Metals Update: #Gold 1904.24 (-1.04%), #Aluminum 1843.50 (+0.49%), and #Copper 6991.50 (+1.34%) [delayed]
  • US Dollar volatility remains heightened in the midst of back-and-forth stimulus negotiations. Get your $USD market update from @RichDvorakFX here:https://t.co/CfpaGfgTrq https://t.co/YCU6VIjlwX
  • Commodities Update: As of 18:00, these are your best and worst performers based on the London trading schedule: Oil - US Crude: -0.00% Gold: -1.08% Silver: -1.58% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/V3riWytkHs
  • some interesting $BTC charts though. Even as Gold and Silver remain in sluggish digestion patterns, Bitcoin just launching higher through some big res. PTJ singing the praises prob didn't hurt #Bitcoin $BTCUSD https://t.co/nC9cKkcbNe https://t.co/NC4Hqd8qoH
  • Fiscal updates are basically the new trade war updates. https://t.co/3P01Ys8Qgr
Dollar, Yen Aim Higher as Markets Turn Defensive Before Greek Election

Dollar, Yen Aim Higher as Markets Turn Defensive Before Greek Election

2012-06-13 10:05:00
Ilya Spivak, Head Strategist, APAC
Share:

Major Currencies vs. US Dollar (% change)

(04 Jun 2012 – 08 Jun 2012)

Dollar_Yen_Aim_Higher_as_Markets_Turn_Defensive_Before_Greek_Election_body_Picture_5.png, Dollar, Yen Aim Higher as Markets Turn Defensive Before Greek Election

Talking Points

  • US Dollar, Yen Aim Higher as Euro Crisis Jitters Return Before Greek Election
  • Euro, Pound to Follow Bund and Gilt Yields Lower as Haven Flows Boost Bonds
  • Australian, Canadian Dollars Continue to Find Direction in Stock Performance
  • New Zealand Dollar May Underperform as RBNZ Ramps Up Dovish Rhetoric

The US Dollar fell against most of the majors as expected amid a recovery in assets linked to risk appetite last week. Risk aversion looks likely to make a come-back this time around however as investors turn defensive ahead of the weekend’s general election in Greece. The outcome has scope to spark large-scale dislocation across financial markets in the event that another inconclusive outcome or an outright win by the anti-bailout Syriza party threatens to push Greece out of the Eurozone. With that in mind, traders are likely to pare exposure to risky assets ahead of the poll.

On the economic data front, the critical unknown in the global economic growth outlook is the degree to which a still choppy North American recovery can offset headwinds from weakness in Europe and Asia. With that in mind, the spotlight is once again on the US calendar. Expectations call for Retail Sales to drop for the first time in 11 months in May while the University of Michigan gauge of consumer confidence ticks lower and New York State manufacturing activity slows in June. Industrial Production is likewise forecast to decelerate. Taken against a backdrop of fading QE3 hopes after last week’s disappointing testimony from the Fed’s Ben Bernanke, this stands to compound pressure on risk-geared assets as global output expectations darken.

For the Euro, a firm correlation with German bond yields (see chart) points to the primacy of debt crisis concerns in shaping price action. Renewed sovereign stress in the Eurozone periphery is likely to boost haven demand for German government debt, pushing yields and the single currency lower. Separately, Eurozone Industrial Production figures are expected to show the largest drop in seven months in April while the final revision of May’s CPI reading confirms inflation at the slowest in 15 months. This may begin to fuel ECB easing expectations as regional growth continues to sour, amplifying downward pressure on yields and the Euro alike.

The British Pound is showing relatively firm correlations with UK bond yields and the MSCI World Stock Index, hinting the focus here is likewise the Eurozone debt fiasco and thereby the Greek election outcome. The result will almost certainly prove formative for risk appetite trends (and thereby global stock prices), while the link to UK bond yields reflects the emergence of Gilts as a regional haven likely to rise in the event of an adverse outcome, mirroring the dynamic between the Euro and the return on German debt described above.

Similarly, the emerging balance between the relationship of the Japanese Yen to stock prices and US Treasuries burnishes the currency’s haven properties and puts Greece-linked worries front and center. The possibility of intervention remains an ever-present wild card. If risk aversion metastasizes into outright panic and USDJPY volatility spikes dramatically, policymakers may step in anew. Japan seemed to have far greater success with quiet management of the exchange rate through late 2011 than with previous big-splash intervention efforts, but one does not necessarily dismiss the other if a particularly sharp plunge takes the pair back toward the 76.00 figure. The Bank of Japan may also unveil additional stimulus efforts, but these are unlikely to prove particularly market-moving in the near term as Eurozone considerations dominate.

The Australian, Canadian and New Zealand Dollars continue to take their cues from stock prices and so look likely to remain direct reflections of broad-based sentiment trends. The RBNZ interest rate decision is expected to see rates on hold at 2.50 percent but weakness in economic data flow since the last policy meeting hints Governor Alan Bollard is likely to ramp up dovish rhetoric. This stands to weigh on the Kiwi Dollar as rate cut expectations build, compounding headwinds from returning risk aversion, and may see NZD underperform its commodity bloc counterparts.

EURO

Dollar_Yen_Aim_Higher_as_Markets_Turn_Defensive_Before_Greek_Election_body_Picture_6.png, Dollar, Yen Aim Higher as Markets Turn Defensive Before Greek Election

Source: Bloomberg

BRITISH POUND

Dollar_Yen_Aim_Higher_as_Markets_Turn_Defensive_Before_Greek_Election_body_Picture_7.png, Dollar, Yen Aim Higher as Markets Turn Defensive Before Greek Election

Source: Bloomberg

JAPANESE YEN

Dollar_Yen_Aim_Higher_as_Markets_Turn_Defensive_Before_Greek_Election_body_Picture_8.png, Dollar, Yen Aim Higher as Markets Turn Defensive Before Greek Election

Source: Bloomberg

CANADIAN DOLLAR

Dollar_Yen_Aim_Higher_as_Markets_Turn_Defensive_Before_Greek_Election_body_Picture_9.png, Dollar, Yen Aim Higher as Markets Turn Defensive Before Greek Election

Source: Bloomberg

AUSTRALIAN DOLLAR

Dollar_Yen_Aim_Higher_as_Markets_Turn_Defensive_Before_Greek_Election_body_Picture_10.png, Dollar, Yen Aim Higher as Markets Turn Defensive Before Greek Election

Source: Bloomberg

NEW ZEALAND DOLLAR

Dollar_Yen_Aim_Higher_as_Markets_Turn_Defensive_Before_Greek_Election_body_Picture_11.png, Dollar, Yen Aim Higher as Markets Turn Defensive Before Greek Election

Source: Bloomberg

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

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

To be added to Ilya's e-mail distribution list, send a note with subject line "Distribution List" to ispivak@dailyfx.com

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES