Euro Slides Ahead of Weekend as All Eyes on Greece

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Market Drivers June 19, 2015

EUR slides towards 1.1300 as Monday Summit scheduled
BOJ keeps rates the same
Nikkei 0.92% Europe 0.73%
Oil $60/bbl
Gold $1198/oz.

Europe and Asia:
JPY BOJ keeps rate unchanged
EUR Current Account 22.3B vs. 18.1B
GBP UK PSNB 9.4B vs. 10.1B

North America:
CAD CPI 8:30

CAD Retail Sales 8:30

The EUR/USD started to slide towards the 1.1300 level in early European dealing as traders began to reduce positions ahead of what could prove to be a pivotal weekend for Greece with EU leaders scheduled for an emergency summit on Monday.

The two sides remain apart and time is short as Greece is running out of money and may not be able to pay its debts next month. There were reports yesterday that ECB was afraid that the Greek banks would not be able to open on Monday, but so far they have been denied and there appear to be no bank runs in Athens this morning. This may be a function of the fact that Greeks have already pulled massive amounts of capital from the banking system with ECB essentially acting a liquidity spigot for Greek banks through its ELA program for much of this year.

The selloff in EUR/USD however has been slow with currency markets in no rush to run for the exits as the underlying assumption is that the crisis – if it does come – will be essentially ring fenced with most of the financial fallout resting on Greece rather than the EZ. Some analysts have even suggested that Grexit could be viewed as a positive to euro as it would remove the most pressing financial risk off the books.

In either case the markets appear to be in wait and see mode with little price action in Asian and European trade. On the news front the BOJ meeting produced no new information with Governor Kuroda reaffirming that the central bank will keep policy the same and noted that weaker yen has not hurt the economy and also added that JGBs have not had much impact due to a rise in yields globally. USD/JPY popped a bit on his comments rising to 123.21 after finding some support around 122.75 level earlier in the day.

In North America the calendar is quiet with only Canadian Retail Sales and CPI data on the docket and no doubt the focus will remain on Greece as traders await the latest news on negotiation. For now however, the price action has slowed to a crawl and most participants stand on the sidelines awaiting resolution one way or another.

Boris Schlossberg
Managing Director

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