There was an expectation that today’s receipt by the Troika of the revised Greek “reform proposal” would send risk and the EUR higher, which is probably precisely why nothing has happened so far, and US equity futures are unchanged ahead of what the HFT algos’ new attention focus is today, namely Yellen’s semi-annual testimony to Congress. As a result, the only thing that has seen notable strength this morning is the USD, which has surged to 119.50 against the Yen, and briefly pushed the EURUSD under 1.1300. which also means that WTI has also gone nowhere overnight and remains under $50. One wonders just what OPEC “rumor” those long crude will leak today.
Asian equities traded mixed following a lacklustre Wall Street close as participants await details on Greece’s reforms after missing yesterday’s deadline. Nikkei 225 (+0.74%) outperformed underpinned by a weak JPY while the ASX 200 (+0.2%) rose, led by basic materials in the wake of better than expected earnings from BHP Billiton (+2.5%). Hang Seng (-0.6%) fell for a 2nd day dragged lower by HSBC (-3.3%) after the Co.’s pre-tax profit fell by 56%. JGBs gained 9 ticks, as the long-end outperformed once again, supported by month-end durations adjustments and today’s well received 40yr auction.
European equities traded mostly lower albeit modestly so in what has been a relatively light session thus far from a macro perspective. In terms of the latest developments for Greece, according to an EU source, the EU Commission is said to believe that the list submitted by Greece is sufficient enough to be a good starting point to move forward. This positive sentiment has subsequently filtered through to Greek assets with the ASE higher by 6.5% and Greek 3yr yield lower by 116bps at the time of writing. Elsewhere, European participants now await Fed Yellen’s semi-annual testimony at 1500GMT, while on a sector specific basis for Europe, telecom names lead the way lower after Vodafone were downgraded at BofAML. Bunds also trade modestly lower this morning, although volumes are particularly light ahead of upcoming key risk events.
In FX markets, antipodeans slumped overnight led by NZD in the wake of tame New Zealand inflation data (Q1 2yr Inflation Expectation 1.80% vs. Prev. 2.06%), with AUD also on the back foot in sympathy. Consequently, NZD/USD and AUD/USD broke key technical levels at 0.7500 and 0.7800, with losses in AUD/USD stemmed by the 0.7750 long-term support level. Elsewhere, GBP has been supported by comments from BoE’s Forbes who said gradual increases in interest rates should support the economy in the UK, adding that low inflation present at the moment will fade quickly. These comments subsequently saw EUR/GBP print a fresh 7yr low, while GBP/USD pared its gains as a result of the broadly stronger USD, alongside the move higher in US yields and USD/JPY breaking above 119.42; the high seen on 17th and 18th Feb. Also from a UK perspective, today saw BoE’s Carney testify at the Treasury Select Committee hearing but these comments were a reiteration of the February QIR. Furthermore, BoE’s Weale was also on the wires saying the BoE may have to lift rates before the timeframe which markets are currently expecting, this saw a brief spell of upside in GBP/USD before being pared as these comments were largely a reiteration of MPC member comments over the past few weeks.
In commodities markets, WTI crude futures have held below USD 50/bbl overnight after yesterday’s sharp-sell off, ahead of today’s weekly API crude oil inventory report, with the stronger USD also weighing on prices. In metals markets, despite spot gold initially holding on to yesterday’s gains amid dampened risk sentiment in the US, prices have now ebbed lower alongside movements in the USD. Elsewhere, Copper prices saw a mild decline overnight with the world’s largest buyer China still away for holidays and LME inventories rising to its highest in over a year of 299,675 tonnes.
