Market Drivers March 9, 2015

Euro bounces mildly but concern over Greek deal remains
German Trade Balance bit less than forecast, China’s Trade explodes
Nikkei -0.95% Europe -0.69%
Oil $49/bbl
Gold $1172/oz.

Europe and Asia:
CNY Trade Balance 60.6B vs. 7.8B
JPY GDP 0.4% vs. 0.5%
EUR GE Trade Balance 19.7B vs. 20.4B

North America:
CAD Housing Starts 8:15

It’s been a quiet post NFP session in Asian and early European trade today as the dollar remained relatively well bid across the board, but both euro and cable rose slightly on some short covering flows.

The eco calendar has been subdued, providing little new information to the market and is likely to remain that way for the better part of this week. Meanwhile focus today remains on the Eurogroup as ministers wrestle with the situation in Greece where the state is apparently quickly running out of funds.

EU Commission chief Junker stated that there will never be a Grexit, noting that it will do irreparable damage to the currency union if the country were to leave. Yet there appears to be very little political will to attack the issue pragmatically. Almost every analyst is in agreement that Greece will never be able to repay its debts given the massive structural burden it carries and the huge collapse in the country’s GDP. Yet the EU refuses to entertain any long term refinancing options and the latest round of measures appears to have all the markings of buying rearranging chairs on the Titanic.

Indeed we believe that the latest collapse in the EUR/USD is only partly due to the impressive growth numbers out of the US. The markets primary concern may be political rather than economic as traders await some sort of long term solution to Greece’s chronic finance problems.

Meanwhile on the economic front Chinese Trade data blew well past expectations with Trade surplus printing at 60B versus 7.8B eyed as exports soared while imports contracted by more than -20%. A large part of the skew was due to the Chinese New Year holiday but the data also reflects the fact that Chinese industrial demand is clearly waning while exports are being driven by orderflow from North America rather than Asia.

The commdollars initially reacted negatively to the news as the drop in imports was a far greater factor for Aussie and kiwi than the pop in exports. The Aussie dropped below the 7700 before finding some support while kiwi held ground ahead of the .7300 figure.

With no major US data scheduled for release trading could remain choppy for the rest of the day. Having collapsed more than 200 points over the past 48 hours the EUR/USD could consolidate between 1.0800 -1.0900 for much of the week as markets focus on two primary themes – the strength of US economic growth and the resolution of the rescue package for Greece. To the first point Thursday US Retail Sales data could prove key to determining the strength of the US consumer, As to the second point the jury is still out on whether EU will produce any kind of workable solution which is why buying EUR/USD for a bounce may be premature.

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