News & Analysis

2nd Greek Bailout Awaits Rubber Stamp

February 21, 2012

FX Commentary – 21st February, 2012

A US bank holiday typically sees both the European and US session trade in low volumes and limited volatility.  The US session was a quiet affair, but with news that the Greek debt drama may finally be closer to an end with Eurozone finance ministers all Brussels whereby a second Greek bailout deal from comments made by ministers is nearing.  The Euro continued on from its strong Asian-Pacific session to peak at 1.32758 over two cents higher from Fridays close.  The first bailout of Greece began in May 2010 totalling 110 Billion Euros and now 130 Billion Euros will be handed over amid stipulations on spending and savings still being debated.   It seems that this money is being given to Greece so Europe can take it off the table now for 12-18 months, rather than if the measures will actually make any structural change to the way the Greek economy runs.

For the first time in several attempts the Finance Ministry and Bank of Japan looks to achieve near term success in its Yen intervention.  Three of its key traded pairs all hit significant points yesterday firstly with EURJPY trading at past 105 yen on the open yesterday its first time since the start of December last year.  The AUDJPY pair peaked at 86.3 Yen yesterday, a gain of 11 Yen since the 24th of November, and 6 yen since the start of the month with carry traders continuing to be rewarded. And finally the USDJPY pair of which price typically has driven previous interventions, which is holding firm just below 80 Yen.  The Dollar had previous given up its gains versus the Yen in the immediate days following interventions in October and August last year, this time however the gains of remained and have extended.

As mentioned, Presidents’ holiday in the US has slowed overnight volume with the majority of pairs seeing a square off of gains late in the European session followed by flat trade till this morning.   From an economic perspective we have Monetary Policy Meeting Minutes due for release but markets will be looking more towards RBA Governor Stevens Australian Securities Investments Commission Summer School 2012, in Sydney and hopefully we can get a comment on recent employment data, Greece and China.  Otherwise expectations are for a flat day if we don’t see anything further from Greece, with the Australia dollar treading water at the time of writing at 1.0750 USD.

Joel Murphy