Euro Leads European Currencies Lower On Greek PSI Deal - Why?

By Ilya Spivak, Currency Strategist

Talking Points
  • Euro Leads European Currencies Lower After Successful Greek PSI Results
  • Australian, Canadian and NZ Dollars Await Cues from US Employment Data
  • Japanese Yen Sold as FinMin Azumi Hints More BOJ Easing May Be Ahead

The Euro , British Pound and Swiss Franc pushed sharply lower against the US Dollar overnight following the long-awaited announcementof Greek PSI results. Athens reported that 85.8 percent ofinvestors holding debt governed by Greek law and 69 percent ofthose governed by UK law participated in the bond swap. Afterinvoking collective action clauses (CACs) meant to cajole hold-outsinto the program, Greece was able to produce a 95.7 percentparticipation rate. This result falls within Eurozonepolicymakers’ desired range of 95-100 percent needed torelease the first tranche of funding through the €130 billionsecond EU/IMF bailout program.

A successful PSI outing confirmed that Greecewould probably not default after all when €14.5 billion inmaturing obligations came due on March 20. Although a blow-up inthe debt-strapped country has not posed the grave threat it oncedid after the ECB’s LTRO operations assured it would almostcertainly not result in a market-wide credit squeeze, themarkets’ general aversion to uncertainty kept investorsuneasy nonetheless until the PSI arrangement was fully realized.Having priced in just such an outcome in the lead-up to today’s announcement,the markets promptly returned their focus to growth-linkedconcerns.

Needless to say, this did not bode well for theEuro. It likewise weighed on the currencies of countries thatheavily export to the currency bloc (GBP, CHF, NOK, SEK) and whoseeconomies will thereby suffer from the recession widely expected toafflict the region this year. Comments from ECB President MarioDraghi following yesterday’s policy announcementsuddenly got their opportunity to capture the spotlight, withtraders appearing to suddenly realize that he was alluding to thethreat of stagflation. Draghi said that inflation would exceed thecentral banks’ 2 percent target this year but chalked it upto a rise in energy prices, adding that growth faced“downside risks” and predicting that recovery would be“very, very gradual”.

Meanwhile, the greenback was little changedagainst the sentiment-sensitive commodity currency complex. For the Australian, NewZealand and Canadian Dollars the standstill appears to reflecttraders’ unwillingness to commit to a directional bias aheadof the upcoming US employmentreport . The markets are looking to an increasinglyfirming recovery in the US to offset headwinds facing global growthfrom recession in the Eurozone and a slowdown in China in 2012.With that in mind, the fortunes of the US labor market a criticalconsideration for risk appetite at large. Expectations call for theeconomy to add 210K jobs in February, capping the strongestthere-month period of employment growth since the first quarter of2006.

The Yen declined against the US currency after Japanese FinanceMinister Jun Azumi said the BOJ’s efforts to ease monetarypolicy have had a good impact on the exchange rate and that heexpected the central bank to continue to take “appropriatesteps”. This stoked expectations that BOJ Governor MaasakiShirakawa and company may be preparing additional easingmeasures.

Asia Session : What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

21:45

NZD

NZ Card Spending – Retail (MoM) (FEB)

-0.7%

0.1%

1.1% (R-)

21:45

NZD

NZ Card Spending – Total (MoM) (FEB)

-0.3%

0.1%

0.9% (R-)

23:50

JPY

Japan Money Stock M2 (YoY) (FEB)

2.9%

3.0%

3.1% (R+)

23:50

JPY

Japan Money Stock M3 (YoY) (FEB)

2.5%

2.6%

2.6%

0:30

AUD

Trade Balance (AUD) (JAN)

-673M

1500M

1325M (R-)

1:30

CNY

Producer Price Index (YoY) (FEB)

0.0%

0.1%

0.7%

1:30

CNY

Consumer Price Index (YoY) (FEB)

3.2%

3.4%

4.5%

5:30

CNY

Industrial Production YTD (YoY) (FEB)

11.4%

12.3%

13.9%

5:30

CNY

Fixed Assets Inv Excl. Rural YTD (YoY) (FEB)

21.5%

20.5%

23.8%

5:30

CNY

Retail Sales YTD (YoY) (FEB)

14.7%

17.6%

17.1%

E uro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

7:00

EUR

German CPI (MoM) (FEB F)

0.7%

0.7%

Medium

7:00

EUR

German CPI (YoY) (FEB F)

2.3%

2.3%

Medium

7:00

EUR

German CPI - EU Harmonised (MoM) (FEB F)

0.9%

0.9%

Medium

7:00

EUR

German CPI - EU Harmonised (YoY) (FEB F)

2.5%

2.5%

Medium

7:00

EUR

German Exports s.a. (MoM) (JAN)

2.0%

-4.5%

Low

7:00

EUR

German Imports s.a. (MoM) (JAN)

1.5%

-3.9%

Low

8:00

EUR

German Current Account (€) (JAN)

10.4B

19.3B

Low

8:00

EUR

German Trade Balance (€) (JAN)

13.0B

12.9B

Low

7:45

EUR

French Industrial Production (YoY) (JAN)

-1.1%

-1.3%

Low

7:45

EUR

French Industrial Production (MoM) (JAN)

0.5%

-1.4%

Low

7:45

EUR

French Manufacturing Production (YoY)(JAN)

-0.5%

0.8%

Low

7:45

EUR

French Manufacturing Production (MoM) (JAN)

0.5%

-1.4%

Low

8:00

EUR

German Labor Costs wda (YoY) (JAN)

-

2.9%

Low

8:00

EUR

German Labor Costs sa (QoQ) (JAN)

-

-0.9%

Low

9:00

EUR

Italian Industrial Production sa (MoM) (JAN)

-1.1%

1.4%

Low

9:00

EUR

Italian Industrial Production wda (YoY) (JAN)

-1.5%

-1.7%

Low

9:00

EUR

Italian Industrial Production nsa (YoY) (JAN)

-

-7.7%

Low

9:30

GBP

BOE/GfK Inflation Next 12 Mths (FEB)

-

4.1%

Low

9:30

GBP

Industrial Production (MoM) (JAN)

0.3%

0.5%

Medium

9:30

GBP

Industrial Production (YoY) (JAN)

-3.1%

-3.3%

Medium

9:30

GBP

Manufacturing Production (MoM) (JAN)

0.3%

1.0%

Medium

9:30

GBP

Manufacturing Production (YoY) (JAN)

0.2%

0.8%

Medium

9:30

GBP

PPI Input n.s.a. (MoM) (FEB)

1.0%

0.5%

Low

9:30

GBP

PPI Input n.s.a. (YoY) (FEB)

7.0%

7.0%

Low

9:30

GBP

PPI Output n.s.a. (MoM) (FEB)

0.3%

0.5%

Medium

9:30

GBP

PPI Output n.s.a. (YoY) (FEB)

3.9%

4.1%

Medium

9:30

GBP

PPI Output Core n.s.a. (MoM) (FEB)

0.1%

0.3%

Low

9:30

GBP

PPI Output Core n.s.a. (YoY) (FEB)

2.5%

2.4%

Low

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.3078

1.3332

GBPUSD

1.5688

1.5868

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya , e-mail ispivak@dailyfx.com . Follow Ilya on Twitter at @IlyaSpivak

To be added to Ilya 's e-mail distribution list, send a note with subject line "Distribution List" to ispivak@dailyfx.com
DailyFX is the forex news and research arm of FXCM, Inc (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

Original Article: http://www.dailyfx.com/forex/fundamental/daily_briefing/session_briefing/euro_open/2012/03/09/Euro_Leads_European_Currencies_Lower_on_Greek_PSI_Deal_-_Why.html

DailyFX is the forex news and research arm of FXCM (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

More from Currencies

Bitcoin Today: Prices Continue to Slump Heading Into Weekend

Bitcoin Today: Prices Continue to Slump Heading Into Weekend

Bitcoin Today: Prices Continue Skid Toward $7,000 as DOJ Launches Investigation

Bitcoin Today: Prices Continue Skid Toward $7,000 as DOJ Launches Investigation

Bitcoin Today: Prices Plummet Below $8,000 in Market Downturn

Bitcoin Today: Prices Plummet Below $8,000 in Market Downturn

Bitcoin Today: Prices Slip as Broader Crypto Market Struggles to Make Traction

Bitcoin Today: Prices Slip as Broader Crypto Market Struggles to Make Traction

Bitcoin Today: Prices Attempt to Recover From One-Month Lows

Bitcoin Today: Prices Attempt to Recover From One-Month Lows