Market Drivers February 9, 2015

Chinese Trade Balance explodes on lower imports
EUR/USD finds buyers at 1.1300 despite Greek woes
Nikkei .36% Europe -1.63%
Oil $51/bbl
Gold $1242/oz.

Europe and Asia:
EUR German Trade Balance 21.8B vs. 18.2B
EUR Sentix 12.4 vs. 3.4

North America:
CAD Housing Starts 08:15

A very quiet, lackluster night of trade in the currency market with majors seeing no follow through on the strong dollar price action post Friday’s NFPs as profit taking was the order of the day. The EUR/USD tried to test the lows just below the 1.1300 mark as Asia opened for dealing but the selloff was short lived. Despite the fact that Greece continues to press its case for renegotiation – the shock value of Grexit appears to be wearing off on the market with currency traders finding euro to be a bargain at the current levels.

The bullish case for the euro rests on the two pillars of lower energy costs and lower exchange rates and today’s better than expected German Trade balance figures are a testament to that fact rising to 21.8 B from 18.2B eyed. This was the best figure since September of 2014 and the second biggest surplus overall indicating that German exporters are clearly seeing the benefits of low oil and lower euro.

The key question going forward however is whether these benefits with flow outward toward the periphery of the EZ with the southern economies of the region seeing growth in 2015. Italy is perhaps the most important of the periphery players as it has suffered through three years of stagnation and badly needs to record some growth. The risks for Italy are not just economic but political as well.

The Greeks have been pressing the case that if Greece is forced out of the union, then Italy with its heavy debt burden of more than 120% of GDP will be next. While the Greeks are clearly playing psychological war games at the G-20 meeting, their point is not lost on the market and the euro could be in for more turbulence if risk aversion flows resume.

For now the pair has found support at the 1.1300 level and is likely to jockey around that barrier while EU officials scramble to resolve or at very least contain the Greek crisis.

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