Asian Session Morning: Humiliation Complete and an Attention Shift

July 14, 2015

Humiliation Complete:
So this is it. Greece has now surrendered much of its sovereignty to a Europe led by Germany in return for an €86 billion bailout program which will keep the embattled nation in the Eurozone. This image of Greek Finance Minister Euclid Tsakalotos seemingly knowing he is being supervised by IMF chief Christine Lagarde seems to sum up how negotiations have gone:

Questions are being asked about the democratic legitimacy of the decision after a referendum resoundingly rejected a more compromising austerity package less than a week ago with 61% of the vote. A vote that proved to only delay and let the economic situation in Greece deteriorate further, giving all the negotiating power to Europe.

The €86 billion bailout program accepted comes on the back of Tspiras accepting conditions of cuts to spending, tax and administrative reforms, highly sensitive pension reforms and the public sale of state owned assets. All of this under the strict supervision of the highly skeptical European Union who still don’t trust Greece to actually implement the changes they have agreed to.

The deal still must be voted on in Greek parliament tonight before the funds will be officially released and even though Prime Minister Tsipras will meet some opposition inside his own ruling left win Syriza party, the deal is expected to get through with the support of pro European opposition parties.

This again throws the Tsipras government into turmoil with new elections on the back of this deal now almost a certainty.

Furthermore, I very much recommend reading the Yanis Varoufakis interview in the New Statesman last night. Politicians who have been pushed out and can now speak freely on their own opinions are so much more refreshing than those in parliament who still have to tow party lines.

“The Eurogroup is completely and utterly controlled by Germany.”

“Greece was set up.”

“Last week’s referendum was wasted.”

Greece, unfortunately in the end has been humiliated.

Attention Shifts to the Fed:
With all the excitement and colour of Greece now out of the way, attention can now shift back to the boring, stable Federal Reserve. Expectation has now shifted back to the Fed having the stability it needs to start tightening interest rates as early as September. A sentiment made stronger by the fact that even throughout the last month of Greek turmoil, the Fed rhetoric has been nothing but positive.

It’s this Fed driven theme that drove the Euro down on the back of a seemingly positive Greek deal:

EUR/USD 4 Hourly:
Click on chart to see a larger view.

The USD as always is large and in charge. Among all the distractions, don’t you ever forget that.


On the Calendar Today:
A massive day across all 3 sessions today, starting off in Australia with Business Confidence survey expected to fall on the back of a month of increased global uncertainty.

We follow this up with a whole raft of GBP and USD sensitive data releases, while the French are on holiday in observance of Bastille Day.

“The French National Day commemorates the beginning of the French Revolution with the Storming of the Bastille on 14 July 1789, as well as the Fête de la Fédération which celebrated the unity of the French people on 14 July 1790.”

Also looking for a big performance from a French rider on today’s stage of Le Tour!

AUD NAB Business Confidence

EUR German ZEW Economic Sentiment
GBP Inflation Report Hearings
GBP BOE Gov Carney Speaks
EUR French Bank Holiday

USD Core Retail Sales
USD Retail Sales


Chart of the Day:
With all the Greek focus on currencies, we take a look at how the US stock market reacted to the news of a compromised deal being made between Greece and it’s creditors.

SP500 Daily:
Click on chart to see a larger view.

The certainty that the Greek decision brought about has helped US stocks stabilise, bouncing off a confluence of trend line support just as price looked like it was going to snap.

Once again price sat precariously right on a key technical level just as a major fundamental announcement was to be made before a direction was taken.

Do you see an opportunity to trade the SP500 from here? Let us know by leaving a comment below or mention @VantageFX on Twitter.

Dane Williams – @VantageFX

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