Markets Set Sights on Greece as Debt Standoff Enters Eleventh Hour

2015-02-20 06:11:00

Talking Points:

Traders Withhold Directional Conviction as Greece Debt Impasse Continues
Euro Unlikely to Produce Strong Response to February Eurozone PMI Data
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Currency markets were little-changed in the overnight session as traders withheld directional conviction pending an update on the stalemate between Greek and Eurozone officials. The administration in Athens appeared to finally back down from its prior refusal to extend its EU/IMF bailout earlier in the day but Germany refused the overture, saying Greece’s offer leaves too much room for a backslide on existing commitments.

Eurozone finance ministers (the so-called “Eurogroup”) are set to convene for another emergency meeting today in a last-ditch attempt to strike a bargain. Eurogroup President Jeroen Dijsselbloem said Greece has until the end of this week to work out an accord after a similar sit-down on Monday. If previous Eurozone debt negotiations are instructive, that means the coming 24-48 hours represent that critical window when brinksmanship gives way to compromise.

The markets seem to be holding out for just that, but the sanguine mood is sure to give way to panic if investors’ optimism proves misplaced. Although unlikely considering both sides’ inherent interest in a deal, such a scenario remains an uncomfortably acute possibility. This means price action is likely to remain constrained for the time being until the fog clears and a clear-cut outcome – whatever that ultimately is – emerges.

On the data front, the preliminary set of February’s Eurozone PMI figures headlines the docket. The region-wide Composite index is expected to show that manufacturing- and service-sector growth cautiously accelerated for a third consecutive month. The outcome is unlikely to yield a meaningful response from the Euro however considering its limited impact on the ECB policy outlook as it prepares to launch QE in March. Needless to say, Greek-inspired uncertainty will likewise limit follow-through.

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Asia Session

GMT	CCY	EVENT	ACT	EXP	PREV
1:35	JPY	Markit/JMMA Manufacturing PMI (FEB P)	51.5	52.5	52.2

European Session

GMT	CCY	EVENT	EXP	PREV	IMPACT
7:00	EUR	German PPI (MoM) (JAN)	-0.4%	-0.7%	Medium
7:00	EUR	German PPI (YoY) (JAN)	-2.0%	-1.7%	Medium
8:00	EUR	Markit France Composite PMI (FEB P)	49.8	49.3	Low
8:00	EUR	Markit France Service PMI (FEB P)	49.9	49.4	Low
8:00	EUR	Markit France Mfg PMI (FEB P)	49.6	49.2	Low
8:30	EUR	Markit Germany Composite PMI (FEB P)	54.0	53.5	Medium
8:30	EUR	Markit Germany Service PMI (FEB P)	54.4	54.0	Medium
8:30	EUR	Markit Germany Mfg PMI (FEB P)	51.5	51.0	Medium
9:00	EUR	Markit Eurozone Composite PMI (FEB P)	53.0	52.6	Medium
9:00	EUR	Markit Eurozone Services PMI (FEB P)	53.0	52.7	Medium
9:00	EUR	Markit Eurozone Mfg Index PMI (FEB P)	51.5	51.0	Medium
9:30	GBP	Retail Sales ex Auto (MoM) (JAN)	-0.3%	0.2%	Medium
9:30	GBP	Retail Sales ex Auto (YoY) (JAN)	5.9%	4.2%	Medium
9:30	GBP	Retail Sales incl Auto (MoM) (JAN)	-0.2%	0.4%	Medium
9:30	GBP	Retail Sales incl Auto (YoY) (JAN)	5.9%	4.3%	Medium
9:30	GBP	Public Finances (JAN)	-	21.4B	Low
9:30	GBP	Central Government (JAN)	-	23.7B	Low
9:30	GBP	Public Sector Net Borrowing (JAN)	-9.3B	12.5B	Low
9:30	GBP	PNSB ex Banking Groups (JAN)	-9.0B	13.1B	Low
14:00	EUR	Eurogroup Emergency Meeting on Greece	-	-	High