Market Drivers February 19, 2015

Euro seesaws as news of Greek compromise creates volatility
USD/CHF climbs but no confirm on why
Nikkei -0.36% Europe 0.05%
Oil $53=0/bbl
Gold $1217/oz.

Europe and Asia:
NZD PPI -0.1% vs. -0.3%
EUR ECB Minutes

North America:
USD Weekly Jobless claims 08:30

CAD Philly Fed 08:30

Its been a choppy night of trade in the currency market with EUR/USD seesawing with every announcement from Brussels and Athens while dollar tried to recover from the decidedly dovish FOMC minutes that put the notion of a June Fed rate hike in doubt.

The wrangling between EU and Greece continued as Greece submitted a formal request for a 6 month extension and tried to reassure the market that it will honor all financial commitments to all creditors. The Greek government also committed to immediate reforms on tax evasion and corruption.

The EU will meet later today at 1400 GMT to evaluate the formal proposal but it appears that all parties involved are coming to some sort of compromise agreement that will push the issue of Greece off the front pages for the near term. None of the proposals issued address the country’s structural problems but if the agreement this week could solve Greece’s immediate funding needs it is likely to ease the pressure on the EUR/USD as the threat of fracture would recede.

The EUR/USD has also received a boost from the unexpectedly dovish FOMC minutes which suggested that the majority of the members were reluctant to normalize rates by the June timeline. Although many analysts have pointed out that the minutes are dated as US economic performance clearly improved since the time of the Fed meeting, the general tone of the summary indicates that the Fed may still err on the side of caution given the very low inflation readings and the massive drop in oil which may have negative impact in the extraction industries even as it provides a boost to consumer spending.

The release of the Fed minutes only served to highlight the importance of next week’s Humphrey Hawkins testimony by Fed Chair Janet Yellen. The market will be watching her every word as it tries to ascertain if the Fed is ready to finally move towards normalization.

As to the EUR/USD it remains anchored below the 1.1400 level for now, but if the Greek situation can find a temporary solution and if tomorrow PMI readings show a pick up activity the pair could once again make a run at the 1.1500 figure.

In North American trade the calendar today is very tame with only the weekly jobless claims and the Philly Fed numbers on the docket. USD/JPY was whacked by the FOMC minutes yesterday but appears to have found support at the 118.50 level as it stays in consolidation awaiting a signal from the Fed.

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