Euro Seesaws On Grexit Fears

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Market Drivers April 15, 2015

Grexit fears weigh on EUR/USD
AU Employment beats forecasts
Nikkei .08% Europe -0.51%
Oil $56/bbl
Gold $1205/oz.

Europe and Asia:
AUD Employment 37.7K vs. 14.9K
AUD Unemployment rate 6.1% vs. 6.3%

North America:
USD Weekly Jobless 8:30 AM

USD Housing Starts/Permits 8:30 AM

The EUR/USD came under renewed selling pressure in early European trade today as fears of Grexit swept through the market. The latest point of concern was a report in the Greek paper Ekathimerini saying that New Democracy believes that a Greek exit is possible. This comes on the back of the S&P downgrade yesterday and constant negative comments from German Finance Minister Schauble.

As we noted yesterday many of the EZ policy makers appear to have given up on the prospect of Greece remaining in the union and while the financial risks of such a move have been curtailed, the political risks are unknown. If Greece were to leave the union it would set the precedent and open the way for anti-EU parties in Italy and France to assert their power.

In either case, the pair sold off to 1.0625 after spiking to 1.0750 in early Asian dealing, but has since recovered back towards the 1.0700 level as bargain hunters came in. The one factor that has kept euro bid over the past few days has been the steadily disappointing drumbeat of US data. Yesterday’s woeful Industrial Production numbers only added to concerns that US economy is simply not strong enough to escape from zero bound just yet.

Today the calendar is light but market will look at Housing Starts data as well as Philly Fed numbers to see if there is any pick up in activity. If the data misses the mark once more USD/JPY could test 118.50 as dollar bull’s thesis will come under further scrutiny.

Elsewhere in Australia the employment data was much better than expected printing at 37.7K versus 14.9K eyed with full employment comprising 31K of that number. The unemployment rate dipped to 6.1% from 6.3% the month prior.

Overall this was an unambiguously strong report and stood in sharp contrast to expectations that slowdown in the mining sector would weigh heavily on labor data. So far that has not been the case and for now at least it allays fears that the RBA will be quick to cut rates further.

The Aussie rallied more than a full cent of sessions lows but stalled ahead of the key 7800 level. The pair continues to churn in a wide 7600-7900 range and is likely to remain there until either the Fed decides to hike rates or the RBA to lower them.

Boris Schlossberg
Managing Director

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