FX Treads Water At Start of the Week

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Market Drivers April 27, 2015

Range trading dominates as week starts
Greek talk continue with focus on Tsipras
Nikkei -0.18% Europe -0.67%
Oil $57/bbl
Gold $1181/oz.

Europe and Asia:
EUR GE Import Prices 1.0% vs. 0.5%

North America:
USD Flash Services PMI 9:45

It’s been a quiet listless night of trade the currency market with major essentially rangebound for most of Asian and early European trade with little fresh news flow to move the market.

With Gallipoli day remembrance holiday in New Zealand and Australia the markets were off to a subdued start of the week with minimal liquidity until later in the Asian session. European open brought a fresh round of dollar buying but that rally also stalled by mid morning London dealing.

Overall, the FX markets were merely marking time today, awaiting to see what progress has been made on the Eurogroup and Greece negotiations and what the Fed will say at this week’s FOMC meeting on Wednesday.

In Eurozone there appeared to be a glimmer of hope with respect to Greece as news over the weekend suggested that Chancellor Merkel and Prime Minister Tsipras held constructive talks over the phone. Negotiations appear to be moving away from the Finance Minister Yanis Varoufakis whose confrontational style has angered some in the Euro group and hope now is that the more collegiate tone between Ms. Merkel and Mr. Tsipras could lead to some sort of deal this week. Time is running short for Greece as the country continues to face a shortfall of cash and has only a few weeks left before it will run out of funds to pay its creditors.

As to the Fed, this FOMC meeting is not expected to produce any fresh news, with policy makers unlikely to signal any tightening into the June meeting. The policymakers are likely to remain highly focused on incoming data with the latest batch of reports offering a mixed picture. Many analysts have noted that the US economy appears to have suffered a dichotomy at the start of this year with business and industrial demand slowing while consumer demand has strengthened. Although the Fed is not doubt buoyed by improving trends in consumer spending. its doubtful that US policymakers would make any changes until the business demand firmed up as well.

For now this lack of focus is likely to keep the market rangebound for the time being with EUR/USD travelling from 1.0800 to 1.1000 while USD/JPY remains contained between 118.00-120.00 barriers.

Boris Schlossberg
Managing Director

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