EU Open Report - 24.06.2015

Rebounding risk sentiment is the name of the game: gains in global equities, declines in EU peripheral yields and rises elsewhere show a positive tone emerging, as progress towards a deal between Greece and its creditors draws near. In FX this has seen USD strength against most currencies, with EurUsd declining. This may sound counterintuitive, but FX price action fits the view that improving risk sentiment is the driver. Investors protected themselves from the Greek uncertainty going long dollars, so recent weeks have seen EUR-positive short covering on the basis of risk reduction. Now the air (and positions) have been cleared for renewed USD buying.

Just be cautious now: since a deal is almost certain, any speedbumps on the road to finalizing the negotiations could represent setbacks to sentiment. Just as improving risk sentiment is helping to push EUR lower, any hiccups could have the counterintuitive impact of supporting EUR.

Reminder: extraordinary Eurogroup finance ministers meeting (starts at 19:00 CET). The aim of the meeting is for the Eurogroup to reach a deal, which can be signed by the EU leaders at the two-day summit this Thursday and Friday. The heads of the 'Institutions' (IMF, ECB and EU Commission) will meet before that, at 12:00 CET, according to an unnamed EU official. 

1. Who Said What

- BoJ May 21-22 Policy Board minutes – Most saw underlying inflation trend  continuing higher, target to be hit around H1 FY’16, impact from decline in real interest rates diminishing, output weighed down by adjustments for now  but economy to continue to rise, weak Tokyo CPI a concern, Kiuchi negative views on CPI, QQE still.

- BoE MPC Weale – Prepare for an UK rate rise by August – Financial Times.

- Nikkei at record highs

2. Calendar 

3. Asian Equity & FX Roundup

Asian equities continued to climb, with Nikkei at record highs, ASX up 0.3%, Hang Seng +0.2% and Shanghai Composite up 1%. UsdJpy and the Jpy crosses  bid in line with the risk-on sentiment, US yields higher. Euro continues to suffer from positioning and hedging - stocks rise, Euro falls and vice versa.

Buying dips in equities seems the way to go. Less clarity on FX today, as main trending items are kicking out of sync temporarily.

Good Luck!