20150401 – APRIL FOOLS

Good morning

High Low High Low
EUR/USD 1.0792 1.0730 USD/ZAR 12.1568 12.0542
GBP/USD 1.4872 1.4816 GBP/ZAR 18.06 17.90
EUR/GBP 0.7264 0.7239 USD/RUB 58.49 57.90
USD/JPY 120.15 119.41 USD/NGN 199.3 199.0
GBP/CHF 1.4428 1.4387 S&P 500 2,068 2,041
USD/ILS 3.9909 3.9630 Oil (Brent) 55.45 54.73

EURUSD traded sideways overnight ahead of the Greek saga story and the US/Iran negotiations. No news emerged overnight from Greece as to the reforms (I thought they already rubber stamped these at the February deadline) and whether the international creditors were happy to accept them. Reports are now saying that Greece will run out of money sometime next week unless yet another lifeline is granted. Seems to me right now its all about Greece take take take without having to give up much. Granted the PM is trying to make both his party (anti-austerity) and the creditors happy all at the same time. Suffice to say there will have to be some give and take and while either sides demands will not necessarily be accepted by the other side, some compromise is needed. What is known is the other EU members who are currently accepting handouts will be pretty hacked off if Greece is given carte blanche while they still find themselves tied to the post. How many times can I repeat this, Greece will HAVE to accept for the most part the terms which their creditors are enforcing and demanding. If they don’t the creditors will switch off the money tap which will almost certainly see Greece go bankrupt and the creditors lose their money (at least for now). So you can see there are some pretty severe repercussions should the negotiations fail. I for one would love to be able to write one final time that a deal has been reached and we can move on. Alas this is not to be and just like in Shakespeare the show must go on and on and on (until of course someone falls on the sword).  The Telegraph today published a story saying Warren Buffett, the billionaire chief executive and chairman of Berkshire Hathaway, has said a Greek exit from the eurozone could be constructive for the region. “If it turns out the Greeks leave, that may not be a bad thing for the euro,” Mr Buffett told CNBC. He said that member countries could come to better agreements about fiscal policy if Greece left the single currency. “If everybody learns that the rules mean something and if they come to general agreement about fiscal policy among members or something of the sort, they mean business, that could be a good thing,” Mr Buffett said.

China surprised overnight when manufacturing PMI unexpectedly improved to 50.10 from 49.90. Let’s not get the Crystal out just yet to celebrate. One better reading doesn’t suddenly make things ok. I still expect the PBoC to lower rates to stimulate the economy. While GDP of 7% in Western Economies is like winning the EuroMillions jackpot, to the Chinese, 7% is a disaster of sorts. In fact anything under 10% is just not good enough. Welcome to the party. Across the road in Japan, the “Tankan” reported a rise from 16 to 19 which can also be viewed as mildly positive but again no need to crack open the champagne just yet. China, Japan, EU, Australia have a rocky road ahead with the CB likely to continue to offer liquidity, QE and lower rates to stimulate the economies. Next Tuesday sees the RBA meeting where there has been talk that another rate cut (last in Feb) is coming. I have said previously that I think the next cut will come in May (5th) as the RBA digests the changes since their last cut. Aggressive cutting can be a good and bad thing, in this case I think the RBA would be better off waiting to see how far the cut has gone to improving the Australian economy.

The deadline for an agreement between US and Iran passed at midnight last night. There was an agreement to extend the deadline though I am not privy to that agreement. I will not want to get into a debate here as to what my thoughts are regarding the outcome of the meeting and the agreement (is reached). One thing that I am certain about is when someone wants something bad enough they will do everything in their power (including hiding things from the other side) to get it. If an agreement is reached and sanctions are eased, Iranian oil will “officially” flood the market adding to the fact that the Saudi’s have refused to cut production. No wonder they have such a keen eye on developments at the meeting. Oil prices remain depressed with oil trading around $55p.b. Needless to say I think oil should remain depressed with a rebound coming once we see growth and smiles in China.

Amazing election result in Nigeria as the opposition leader Mr Buhari beats Mr Jonathan. Mr Jonathan conceded defeat and stepped aside which for Nigerian politics/politicians is a first. Mr Jonathan’s defeat is the first time in Nigeria’s brief democracy that a sitting president has not won a second term or handed power to a nominated successor.


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