Collinson FX Market Commentary - July 2 - European nervousness

by Collinson FX on 3 Jul 2015 Collinson FX Market Commentary - July 2 - European Click here to find out how to get CollinsonFX's free iPhone app

July 2 - The Greek crises stumbled through nervous markets experiencing volatility and unwanted uncertainty. The solution lies in the hands of the politicians and bureaucrats and not the people. The referendum is an attempt to raise the anti and an attempt to receive a better deal from Europe with a 'no' vote from the citizenship. Merkel has announced no further negotiations with Greece, until after the referendum is completed, next week.

The country is now in default with the halt of bail-out funds. This could lead to the exit from EU membership which may be best for both parties. To the extent, that markets have anticipated this, it may not have a major impact on the single currency immediately, but it fundamentally undermines the currency long term. This should bring the EURO back to 'whence it came'! The EUR dropped to 1.1040, while the GBP slipped to 1.5600, amidst the mayhem. Bonds settled, apart from Greek, which the yields continue to spike.

Commodities have been falling, with demand and uncertainty, which is impacting the associated currencies. The NZD traded below 0.6750, while the AUD dipped under 0.7650, hit by a fall in local Manufacturing data. This week will be dominated by the developments in Europe although no major decisions will be made until next week, after the referendum. The US economic data is mixed with steady manufacturing data and mixed employment figures. In this environment markets may focus on the Jobs and domestic growth data for daily moves.

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July 1 - Greece misses official debt repayment and defaults, compounding the previous 'technical' debt default, and throwing makets in to a state of flux. Markets are nervous, considering the Chinese equity collapse and the Puerto Rican debt crises! Negotiations continue and the referendum is likely to buy time, despite the result being irrelevant, giving the regime time.

This left-wing Government reeks of incompetence and cannot comprehend the extent of the 'Grexit' and the impact on the citizenship. The EU will bend over backwards to reach a compromise but even they must have limits!? The EUR slipped back to 1.1140, while the GBP held 1.5730, with a slowly improving GDP number confirming the economic recovery.

The AUDUSD held 0.7700 to begin the new financial year, while the KIWI crashed below the technical supports and now tests 0.6750, with fall in Business Confidence reflecting the state of the local economy. Greece, China and Puerto Rico gives yet another excuse for the Fed to withhold any interest rate rise. The rate rise was always problematic as a return to normality is a contradiction in terms.

How can the Government service record debt levels with 'normal' interest rates? Monitisation of debt has become the 'norm' and confounds all monetary theory.

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