Daily Forex Brief 17th jun
Daily Forex Brief |
All eyes yesterday remained transfixed by unfolding events in Greece, with IMF Special Adviser Zhu fanning the flames of fear by remarking that he was very concerned by the dramatic change that had taken place in the previous 24 hours. Renewed political instability in Greece and the image of violent protests against new austerity measures in Athens the previous day was a reminder that obtaining internal agreement on EU/IMF demands was looking decidedly dubious. Some brief respite emerged yesterday as it became clear that the IMF would shell out the next tranche of Greek aid, happy that Europe had provided sufficient comfort that Greece would be funded for the next year. That said, for the pessimists the sight of the IMF backing down was not encouraging. There was also a suggestion that Germany may push for a delay to a second rescue package for Greece until September, to provide more time to reach agreement on burden-sharing. Unfortunately, the financial markets are not in any mood to give Europe more time, with Greece's demise rapidly infecting other eurozone sovereigns. For instance, the Spanish 10yr yield widened by a further 17bp vis-a-vis Bunds to 275bp, not surprising given the heightened protests outside the Catalan Parliament on Wednesday. Greek 5yr CDS jumped another 125bp at one stage yesterday to a new record 1,850bp, Portuguese 5yr CDS soared by 44bp to 833bp, and Irish 5yr CDS rose 34bp to 805bp. All-in-all, it was another day when risk was lowered, with the euro, equities, commodities and G4 bond yields all lower and the dollar in the ascendancy. The Aussie fell below the key 1.05 level for the first time in two months, the Kiwi dropped under 0.80 and cable fell through 1.61. |
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