How often have we had strong economic data published in the United States or United Kingdom, but lagging data from the Eurozone. It has been the norm over the last few years, but a funny thing is happening, this week we’ve seen disappointment from one of the former stalwarts and positive surprises from the laggard. A few data points don’t make a proper population, and certainly the disappointing data from the United States is within a context of still fairly solid albeit unspectacular growth. This seems to be more about Eurozone catching up than the already recovering western economies really slipping back. Nevertheless the less the financial markets have taken note, and the dollar has softened in recent sessions. What had recently looked liked the end of a 2 month correction in the greenback from the highs of mid-March is morphing into a potentially deeper correction. My original assumption of a possible retracement up to the 1.18 – 1.20 zone in EUR/USD looks more and more realistic. One things is for certain, the 1.1392 high has now been violated, so I can tell you officially that the US dollar bull trend has not re-started.

The poor data in question in the United States was flat retail sales growth for April, which following on from the weak Q1 GDP numbers of +0.2% (vs 1% forecast) recently published, paints a less cheerful picture of the U.S economy than what we’ve become accustomed to. Not surprisingly speculation is rising that these lacklustre numbers are likely to push back the first interest rate rise. One of the pillars supporting the strength of the greenback has always been the expectation of earlier rate rises across the Atlantic. If that is no longer the case, it’s no surprise that some of the gloss will come off the US dollar. In a recent speech, Federal Reserve Bank of San Francisco President John Williams described himself as being in ‘wait and see mode’. This is fair enough, and he pointed out that with the next meeting in June, there will be a lot of data that can be studied between meetings to facilitate the interest rate decision. It’s worth noting that there are increasing questions about the efficacy of seasonality adjustments used in US GDP calculations. I have some sympathy with this, given the dramatic jump in growth data in Q2 and Q3 last year, in comparison to Q1. Perhaps the same is in store for us again?

On the other side of the Atlantic, the news from the Eurozone has been surprisingly good, and it’s the laggard nations of France and Italy in particularly that positive surprises have come. Germany has, if anything, been disappointing. If the trend continues, this is fantastic news for the Eurozone, but I think we need to be cautious about the meaning of this, and its sustainability.

Governor Carney in the UK, despite solid growth, has not contradicted market expectations that the earliest time to expect rate rises is next year. GDP growth forecasts for this year were trimmed to reinforce the point. This didn’t do much harm to the pound sterling though, which just illustrates the dollar’s weakness over the last few sessions.

The greenback is most certainly not the weakest currency of the moment, that title goes the Ghanaian cedi which has made new record lows. Coupled with the stresses the naira is experiencing in post-election Nigerian, it is clear that the impact of last year’s commodity meltdown are still rippling outwards.

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Good morning

The pound continued its rally post elections as FX traders continue to cover short GBP positions adding to the euphoria after the Conservatives won the elections last week. FX traders have noted that the market has been covering long USD positions from 1.5200 all the way through 1.5700 yesterday. The GBP has settled this morning  opening at 1.5665 ahead of the labour data at 9.30am and the inflation report due at 10.30am today. With unemployment expected to fall 0.10% to 5.50% and Carney again commenting on the CPI numbers, the market is likely to ease up on the pressure to cover short USD. Having said that there is still a large USD holding and any further rally in the pound could see the GBPUSD drive up towards the mouth-watering 1.60 handle. I think if this does happen you should seriously consider either entering into short GBP positions or if you need to convert into USD (and EUR) you should act quickly. The situation in Greece is behind my thinking and if Troika and Greece’s creditors pull the plug you could very well see the USD mount a serious rally taking the GBP lower. Yesterday saw amazing Industrial Production data released increasing 0.50% month on month. This will give the UK’s Q1 GDP a boost and again reinforcing the amazing work the Chancellor and BoE have achieved in driving the UK economy higher. It is no wonder business leaders voted Conservatives.

Greece’s woes sent a shiver down the stock markets yesterday as the pressure rises to boiling point ahead of the Eurogroup’s meeting later this week. While I have noted that GREXIT is simply not an option, I think Troika, the IMF and ECB are slowly losing patience with Tsipras and his party poopers. As the German FM has noted, the Syriza party are a bunch of amateurs who have little to no experience in finance and how to balance the books. How they continue to reject reform and austerity is baffling. How many times have we heard the German FM repeat his concerns. Surely at some point like a boxer’s corner, the towel “will be thrown into the ring”. Unless reforms and austerity (just like we have seen in just about every major economy globally) is forthcoming I fear the writing might be on the wall and the IMF/ECB will have to allow Greece to default and leave the EUR/EU. That will be a financial atom bomb given that we have never seen something like this before. No doubt the USD & Gold will be the ultimate winners as Greek banks fold and Caesar returns to lead the country. In fact here is a suggestion, Chancellor Osborne could spend the summer in Greece and sort things out.

German GDP came out this morning and disappointed. The data showed the the economy rising 0.30% after last 1/4’s 0.70% rise. Austerity continues in the EU (€1tn) and Pres Draghi must ensure the EU begins to grow independently as is the case in the USA. Only problem is the EU started 3 years too late!!

As for the short term I think other than a Greek default the USD is likely to trade in a narrow range ahead of the much anticipated US rate rise in September. I think the market is unlikely to get ahead of itself and will in all likelihood start rebuilding long USD positions at the start of the summer. For now then lets get used to the GBP trading on a 1.50 handle Ag the USD, high 1.30’s Ag the EUR and the EURUSD above 1.10. The world is focussed on Greece (yet again). How it turns out is anyone’s guess. Let us all hope there is a rainbow in the end.

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The Greek government has authorised the payment of the €750m that was due the IMF, ending a period of uncertainty. But.. talks are still ongoing with creditors as to whether the giant €7.2bn expected aid package will be released for the Greek government’s use. As things stand Greek officials are still pushing for Eurozone finance ministers to deliver a positive statement regarding the negotiations to unlock the package. It’s hard to see how this is possible in the current climate where there are significant differences between creditors and the Greek government on a raft of issues relating to the Greek restructuring programme. Pensions and collective bargaining rights are a particular stumbling block, but no doubt, given the radical views of Syriza, there are many more. Still it’s worth noting that Grexit and default appear to have been fairly well discounted by the currency markets to date. One would have to assume that we would require some new information for Greece to once again drive global risk sentiment.

Crude oil reached my correction target of $69, and we have since had what looks like a clear impulsive move lower. As things stand, I will state that $69.63 is a level we should not see for some time and if my view is correct we may be about to see the re-initiation of a bearish trend for this hugely important commodity. Please note the attendant collateral impact of lower oil prices on various economies, financial markets and consumers. For now I would assign a medium level of conviction to this view, but as always I will update you as the view evolves. A short term bounce from current levels is entirely realistic before a deeper fall could happen. Watch this space!

In about an hour we expect to see industrial production data published in the UK. I will be monitoring the data release closely to see what impact – one way or the other – it has on the pound sterling. This should provide us with a bit more insight into market positioning and how much longer the election euphoria will influence the fate of the British currency. It is after all… yesterday’s news. Later on in the day we get somewhat more significant data…a NIESR GDP estimate for the UK economy. And I will also be keeping an eye out for information coming out in the United States. Some job openings data from JOLT, and also a speech by an FOMC member who has been quite hawkish in the recent past. Not long ago Mr Williams talked about the possibility of interest rate rises in the early summer. Well… it’s very close to early summer if indeed it isn’t already. What’s he going to say now? And what impact will it have on the US dollar and more generally risk sentiment. This could be important.

From my technical perspective, all the conditions have now been met for a return to a US dollar bull trend. The minimum requirements for both EUR/USD and GBP/USD have been achieved, granted cable lagged a few days, but I have a suspicion that these currency pairs might be somewhat lower by the end of this week. It will be interesting see the narrative that takes us there, if indeed my view is correct!

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Good morning

Absolutely amazing!! Any uncertainty surrounding the UK elections has now passed and the new Conservative (MAJORITY yippee) govt. can get on with making the UK economy a powerhouse of world economies. The electorate has spoken and spoken loudly. As for those protesters on Saturday, shame on you all. As you know the GBP rallied marvellously as the exit polls came out on Thursday and despite a decent showing on Friday’s NFP (+223k) the GBP has remained resilient and above the 1.54 handle. As the even risk has passed GBP FX volatility has “collapsed” as expected with the 1m now 9% mid (from over 12), 3m 8.90% mid and 1y 8.5% mid, while in EURGBP 1m 9.10%, 3m 8.65% and 1y 8.25%…..all in line with a what the market expected with a Conservative majority. Going forward I believe FX vols should find a base here given the event risk that still exists in Greece. No solution has been found or come close to finding which in turn will keep the options market “on its toes”.

Despite the more positive picture in the EU (data, excl Greece), the EU continues to face an uphill climb one which will see the EUR downtrend continue. The overall picture for the EU has not changed and with the expected rise in US interest rates in September, the EUR will face the guillotine. As you know PARITYFX continues to cal for EURUSD PARITY (1.00:1.00) circa Q3 and this will drive the USD higher vs all her trading partners (G7). So getting back to the state of the GBP, despite the new majority government, the USD will take centre stage again and rise. Bottom line, the net effect will see the GBP weaken again vs the USD, but vs the EUR we still see the GBP strengthening as a result of the divergent state of the economy between the 2 unions.

The Eurogroup meets today to discuss the ongoing negotiations with Greece. While negotiations are still on a knife’s edge, the recent shake up politically in Greece has given Troika hope that a solution can and will be found. In fact as we mentioned last week, the ECB passed a €2bn lifeline to Greek banks. This week’s sees another repayment due from Greece and it will be interesting to see if they can come up with the cash. Greece is still holding out short-term for the further €7.2bn, money which is seen as desperately needed to keep the country on her feet.

Later today we hear from the BoE regarding the interest rate decision plus QE total. No change is expected. Wednesday sees the BoE publish the labour report and Inflation report. These 2 data are CRUCIAL to the question of when the BoE is likely to raise rates in the UK and in turn the GBP. With the recent disappointing data, Wednesday’s report will in all likelihood show a slowdown in the UK economy, a further interest rate hike delay, lower GDP and the result should see the GBP suffer further against the USD especially.

Big news over the weekend as we have mentioned here several times, the PBoC (China) cut both the benchmark deposit and lending rates by 0.25% to 2.25% and 5.10% respectively. The big winner was the AUD which rose initially to 0.7930 before settling back to 0.7900. i think the PBoC will now give it a couple months and see how these recent cuts filter into the economy before deciding what to do next. Suffice to say they have more ammo and can continue cutting rates.

In summary, for this week I see the resumption of the USD rally and sell off in emerging market currencies.

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Did you see this coming? I didn’t! But hindsight as they say makes geniuses of all of us. The Conservative party look on course to win a slight majority in the British parliament when all is said and done, which means that we won’t have weeks of back door negotiations, ergo no period of uncertainty to look forward to. The British pounds is reacting as one would expect and has surged over the last 12 hours, it is up 1.5% versus the US dollar and up 2.1% versus the euro. My feeling is that the fear trade is primarily responsible for this, traders covered shorts that had anticipated a hung parliament and a Labour coalition. As the exit polls started coming in these positions were vaporised, fear of loss is always a greater motivator than greed. My reference to hindsight is what has become obvious in this election… the SNP were always going to perform strongly in Scotland and the Labour party was the obvious victim there. In England the Liberal Democrats were always likely to suffer their status as the junior coalition member. After all, why vote for them… either you agree with the achievements of the coalition government and you credit the Conservatives (the last few weeks the Lib Dems have done everything they could to distance themselves for their senior partners, a colossal tactical error in my view), or you would go for the Labour party if you were intent on repudiating the previous government. There was no reason to vote Liberal Democrat, and that’s how things turned out. Once these strategies are considered, it’s really no surprise that the Conservatives have outperformed and both the Labour party and Liberal Democrats have been big losers. I fear there are consequences to this election that will alter British politics for good or ill. Consider this… UKIP has a greater share of the vote than the SNP by a substantial margin, but they will end up with one seat in all likelihood while the SNP canter away with over fifty. This is simply untenable electoral maths in an advanced democracy and something will need to be done about it. I can’t see first past the post surviving. How ironic that an undreamt of Tory majority and the end of the first coalition government in decades will virtually guarantee that there will ALWAYS be coalition governments going forward. I say this because a move to proportional representation virtually guarantees that no party will ever have a popular mandate in that system.

Moving on.. perhaps as important today will be the non-farm payrolls employment report which is published in the early European afternoon in the United States. Economists are forecasting 224,000 job gains versus the prior months disappointing 126,000 reading. I am keen to see a number of things:

1. Revisions to prior month’s data? Was that 126,000 data point a poor initial estimate?
2. What happens to the unemployment rate? It is currently at 5.5%, the closer we edge towards 5% the more pressure there will be on the Federal Reserve as that would mean we will be effectively at full employment with interest rates at 0%. Surely a reckless state of affairs
3. What happens to Average Hourly Earnings? If we get a number in excess of the +0.2% growth forecast this will be another sign of a tightening labour market. The US central bank simply cannot afford to be seen as behind the curve

In China, further signs of economic slowdown are evident in the trade numbers published earlier this morning. Exports were down over 6% highlight tepid demand in the rest of the world, but more interestingly imports were down over 16%, which speaks volumes about the Chinese economy. More stimulus anyone? Growth is at its weakest since the global financial crisis, we all need to hope that the Chinese government can negotiate successfully between maintaining a decent level of growth and achieving an effective rebalancing of the Chinese economy from export driven growth.

The euro is up 7% versus the US dollar since the March lows, roughly when Syriza came to power in Greece, and here we are, close to a defining moment, and the omens look shaky. Greece needs €7.2bn of funds released by creditors if the government is to avoid defaulting on its debts. Negotiations are at a critical stage with not enough signs that agreement is likely to be reached in time. But the euro remains close to recent highs. However, and I’m irritated that I neglected to send this out to our readership, I did have a conversation with an ex-colleague who manages his own hedge fund about the likely path for EUR/USD. I include the chart at the time (6^th of May) and my views.

EUR/USD… are we starting wave (v) of C? Once done perhaps the downtrend can start again…

Upside targets are:

1.1392 if wave v = wave i

1.1543 if wave v = 61.8% of waves (i) & (iii)

I could be wrong of course. An alternative count, assuming I’m correct in looking at this as a ‘C’ wave, could be even worse. In that one, we’re actually only at wave (v) of iii of C. With an eventual end of wave ‘C’ targeting closer to 1.19. Time-wise that one might be a better fit, because it implies 0.382 x length of time in the original dollar bull trend which was about 11 months…

A ringing endorsement of Elliott Wave theory. The reason I mention this, is that the first target I speculated about has been hit. It is entirely possible that the dollar correction is over. It is too early to confirm this, but we have done the minimum required for a correction. I would describe my view as neutral to biased towards a resumption of the US dollar trend at this point. For those who have dollars to buy, this might be as good as it gets.

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Good morning

The phrase “The pot calling the kettle black” is an idiom used to claim that a person is guilty of the very thing of which they accuse another. Sky news headline “Greece Slams Creditors as IMF Default Avoided”:  Greece says it has gathered enough cash to make repayments to the International Monetary Fund (IMF) today (6May) but hit out at creditors over protracted negotiations on a new loan deal. The anti-austerity government in Greece, which came to power in January, has previously been accused by its eurozone partners of seeking more cash while offering little compromise in return. As the country runs out of money, Greece said on Wednesday it was in the process of making a €200m payment due to the IMF. But as a 12 May deadline looms for a further €750m repayment, Athens lashed out at its creditors and expressed its own frustration at the state of the bailout negotiations. A government statement said “serious disagreements and contradictions” between the EU and IMF were to blame for the stalemate. “Under these circumstances there can be no compromise. The responsibility belongs exclusively to the institutions and their weakness of communicating with each other,” it continued. The state of the country’s public finances could make Greece ineligible for new help under the IMF’s rules but all sides have said they expect a solution to be found to prevent Greece having to default on its debts and leave the eurozone. No disrespect to Greece (meant) but are they having a laugh!! As Wolfgang Schaeuble (Germany’s Finance Minister) noted Troika are NOT to blame for Greece’s cash rather, rather the country has been “living above its means” (i could not have said it any better). It is a well known fact that the labour and pension laws that exist in Greece are archaic, unfair and due a major overhaul. How the Greeks can expect to retire on a full pension at 50 while the rest of the EU starts at 60 is anybody’s guess. This attack by Greece on her creditors is an insult. Nevertheless Troika took the insult on the chin and went further by boosting its emergency cash to Greece’s banks by €2bn on Wednesday. As we have noted previously, without this cash injections Greece’s banks will simply run out of cash bringing the country to a standstill. Greece should be throwing everything and the kitchen sink by reforming the pension/labour laws and satisfy Troika’s demands. Watch this space, there is still a great deal to come.

The day of reckoning has come. UK goes to the polls in what can only be described as the closest election in years. I for one sincerely hope when the electorate are standing in their cubicles with pencil in hand they CHANGE their vote and go with the party that has DELIVERED economic growth, jobs, wage growth and financial stability. Suffice to say in my humble opinion anything but a Conservative win should see the GBP take a hammering as the market bought the rumour (Conservatives) and sold the fact (Labour wins). We have written many times of the consequences the UK as a whole faces, by this time tomorrow we will have a better idea exactly who will be running the country for the next 5 years. If we are faced with the “red” party, employees brace yourself for job losses, employers brace yourself to hold on to what you have built. That is the choice the UK electorate face today. GBP opens relatively “calm” trading at 1.5170 and 0.7480 as I write this. As the exit polls are announced later in the day/evening you can be rest assured those levels will be a distant memory. Good luck

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The see-saw in dollar price action continues with EUR/USD less than 50 pips away from last week’s high, this despite fears of a negative outcome over the impasse in Greece. Creditors remain deadlocked with Greek government officials who are resisting demands for economic reforms before €7.2bn of bailout funds are released. But as I said to start with… the euro is in danger of making a new 2 month high?? This only happens when there are few marginal sellers of euros, or perhaps more accurately marginal buyers of dollars.

We have a huge week in front of us:

• Continuing discussions between the Greeks and their creditors. There remains a significant risk of default, if not Grexit
• British election tomorrow – which is significant because of the UK’s relationship with the Eurozone and what type of a financial services sector will exist in London going forward
• Key employment data in the United States on Friday. We have heard noises from senior policy makers in the US discouraging talk of rate rises this year, but another strong showing in the labour market, particularly if wage growth continues to accelerate will simply renew the talk of policy normalisation. Certainly the solid ISM numbers yesterday will go some way to renewing confidence that growth in the US remains robust!

Markets remain very choppy generally, which could be due to the time of the year, or more specifically about an excess position unwind which is ongoing. You only have to look at the chart for Bund yields below (courtesy of Bloomberg) to get an appreciation of the scale of position reduction at the moment. The big question remains will the preceding trends prevail after this period of correction?

Not surprisingly European shares have been retreating from their post-QE record highs. One would imagine that the sheer scale of liquidity that will continue to pour out of the European Central Bank will halt this slide at some point, so this is probably just a case of ‘buy the dips’, but it’s still not a fun experience while it’s happening!

Tomorrow voters will take to their booths in Britain. With a very high probability of a minority government the most likely outcome. But everyone has been afraid of this for some time now. It really is not clear to me that the reality will be as damaging for pound sterling as some might fear. Indeed whatever the initial volatility surrounding any announcement, we might find those who have been selling GBP, give up in disgust if they don’t get the spectacular moves their darkest fantasies have conjured. Let’s be honest, we’ve seen this type of phenomenon before. I rather suspect that the market will be less concerned about which party forms the government, and more focused on the structure. But in any case the time for speculation is just about over.

The US trade balance has not been something I’ve paid much attention to for years, but I do recall decades ago when I started out in this business, it was such a big deal. I did however pay it a glance yesterday, as the trade deficit widened quite a bit. Dollar strength going into an electoral cycle in the United States might result in quite a bit of noise. What was interesting in the details is that exports remained stable, but import grew by 7.7%. This is clear a sign of growing consumer confidence in the United States, but also evidence that the stronger dollar is helping to make imports more attractive. Let’s see what the Presidential candidates have to say about all this, and perhaps more importantly, what weight will Federal Reserve officials assign to this. I’ll be keeping an eye on the unit labour cost data coming out of the US later on today, I’ll tweet if it’s interesting.

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Good morning

I want to start across the other pond, as written and predicted by PARITYFX on the 17th March, the RBA (Australia) has cut interest rates by 0.25% to 2.00%. After starting the easing cycle in February, the RBA jumped March and April and cut. The RBA members are waited because (1) benefit in allowing some time for the structure of interest rates and the economy to adjust to the February rate cut,  (2) advantages in receiving more data to indicate whether the economy was on the previously forecast path, and (3) a greater degree of uncertainty about the behaviour of borrowers and savers in a world of very low interest rates. The AUDUSD is trading around 0.7870 having appreciated vs the USD on the news to 0.7909. The RBA “judged that the inflation outlook provided the opportunity for monetary policy to be eased further, so as to reinforce recent encouraging trends in household demand,” citing “inflation is forecast to remain consistent with the target over the next 1-2 two years, even with a lower exchange rate”. The RBA did not specifically note their bias towards the AUD noting “further depreciation (in the AUD) seems both likely and necessary, particularly given the significant declines in key commodity prices”. As I mentioned back in March the RBA are now likely to exercise patience and see how the latest cut feeds into the economy. Further cuts will ONLY come if the RBA feel the economy is still struggling and needs another fresh rate cut. The latest cut will add to the already strong housing market and add to the wealth effect that one is witnessing in Sydney, Melbourne and Perth. Given the slowdown in China, the RBA has no choice but to throw everything they have at stimulating the economy irrespective of the consequences on the already overheated housing market.

Important day for Greece tomorrow as the IMF awaits confirmation on whether they will see their money (€1bn give or take). The FT reported over the weekend that the IMF has threatened to withhold further support to Greece unless Greece delivers adequate and trusting reforms (we saw this a few weeks ago when the IMF met in the USA). No doubt the ECB, IMF and Eurozone creditors are all watching tomorrows due date to see how far Greece has come to sorting out their financial woes. In my humble opinion, Greece is unlikely to have the funds to replay the IMF, which will have to allow Greece more time to repay the debt. Truth is until such time we see meaningful reforms instituted in Greece, Tsipras will simply try to “rob Peter to pay Paul”, and in other words any money they get will simply be diverted to pay off other creditors. Greece’s debt mountain will continue to climb until such time they realise the game is over and they have no other option other than to toe the line, reform and potentially DEFAULT. The run on the local banks will continue and if I had my money with a local bank I would be making darn sure I have my money as far away as possible to protect it.

“3 days of the Condor” or should I say 3 days to decide whether the country goes FORWARD on the current path (Conservatives) or BACK to 2008 financial chaos/bankruptcy/disaster (Labour /SNP). The 2 Ed’s vehemently denying that they will tie up with the SNP to form a coalition govt, is a flat out LIE. Any reasonable person should see through this and vote against the atom bomb. If the SNP get into power it will make Napoleon’s policies look like child’s play. The English, Welsh and N.Irish will suddenly find themselves at the mercy of Naploleon (Nicola) not to mention at the mercy of every and any nation or terrorist that is looking to harm our beautiful United Kingdom (no Trident). SME’s….all that hard work to get where you are today will be kissed goodbye. Start looking to lay off staff and get a job. Needless to say those with jobs will come into work and do as they are told because anything less will see them on the street looking for a job while competing with 100@s of other people in the same predicament.  Yes the decision is really that easy, vote FORWARD or BACK.

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The month of April is over, and it will be recorded as one of the worst for the dollar for almost 2 years. My concern about an ‘outside month’ (also called a bullish engulfing pattern) for cable (GBP/USD) didn’t come to pass in the end with the monthend close at 1.5348 (below the key level 1.5430), but one could argue that the price action for EUR/USD indicates that further dollar weakness is in store for us this month. In fact the monthly chart for EUR/USD illustrates something we should all have known anyway – the market has been far more negatively disposed to the euro than to pound sterling. It is likely, in my opinion, that EUR/GBP will continue to recover over the next few weeks as the market retrenches from extreme short EUR positions. 0.7485 would be my first target for EUR/GBP, but even 0.7800 is a possibility before all is said and done.

Another sign of tightening labour markets in the United States was evident yesterday, following the publication of the Initial Jobless Claims report. The number was the lowest in 15 years, suggesting that the jobs market is regaining some of its swagger after cooling over the winter months. Of course a few months of falling unemployment rates would further increase confidence in this observation but it does look like something very positive is happening in the US labour market. As I’ve said many times before this is the most important issue that will occupy US policy makers in making a determination about when to start normalising interest rates. It appears the FOMC was right to give themselves maximum wiggle room for future policy meetings.

We should all keep an eye out for happenings in Greece, as the government there is finding it difficult to meet their pension obligations. There are pictures of queuing pensioners outside banks, waiting to pick up their payments. The government has claimed that there have been technical glitches delaying payments, whatever it is they need to fix this quickly, as with most European countries demographics make the elderly a significant proportion of the population, Syriza could find itself in an ugly situation boxed in between angry pensioners and intractable creditors. Who knows what extremes a fatally wounded government might attempt? Talks with the IMF are ongoing. It is interesting to note that this is all happening with a backdrop of a strongly recovering euro. If that doesn’t illustrate extreme market positioning I don’t know what does, after all, time was such scenes would have led to panic euro selling. Given the recent retreat of bund yields from the zero bound, I am forced to ponder if some giant macro funds have been unwinding short euro, long bund trades. Or have bund sales, as the FT has queried, a sign of confidence in ECB QE, I’ll leave the search for answers to those far smarter than myself (or at least those paid to do so!).

We’ve looked westwards to the United States, and now at our continental neighbours, time to look far towards the east. There has been some relief in the Japanese government (I question whether the elderly feel the same way) about the uptick in inflation reported earlier on today. Prime Minister Abe’s attempt to encourage an inflationary mindset is still on track it seems. I have to shake my head and wonder at a policy that will devalue the massive state debts that the Japanese people have been encouraged to put their life savings into. We give governments the benefit of the doubt far too easily!

Also in Asia, Chinese manufacturing index data showed some stability, albeit at a barely expansionary level. This seems more like postponing when we need to really get concerned, but perhaps the attempts by the central government to stimulate the economy will be fit for purpose. Still the heady days of 10+ % growth are well and truly over. Call me cynical, but if we are getting 7% GDP growth data being published these days, real growth may be closer to 4 – 5%. Let’s hope the transition from export led growth to a less mercantilist structure are successful. This is important for not just China but the rest of the world.

DISCLAIMER

Any financial promotion contained herein has been issued and approved by ParityFX Plc (“ParityFX”); a firm authorised and regulated by the Financial Conduct Authority (“FCA”) as a Payment Services Institution with registration number 606416.  It is for informational purposes and is not an official confirmation of terms.  It is not guaranteed as to accuracy, nor is it a complete statement of the financial products or markets referred to.

Opinions expressed are subject to change without notice and may differ or be contrary to the opinions or recommendations of ParityFX. Unless stated specifically otherwise, this is not a recommendation, offer or solicitation to buy or sell and any prices or quotations contained herein are indicative only. To the extent permitted by law, ParityFX does not accept any liability arising from the use of this communication.

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