Greek Uncertainty Leans On The Euro

The euro fell against the greenback on Monday as uncertainty swirled over whether or not Greece’s negotiations with its international creditors will get solved in the next 21 days. It is rumored Greece will run out of cash by April 20.

Meanwhile, with Good Friday making it a holiday-shortened trading week for most currency traders, many would likely prefer to escape this month unscathed to begin the second quarter next week. However, with U.S. nonfarm payrolls (NFP) data rounding out the week, it may not be such an easy task to complete without experiencing some collateral damage.

Investors should be thankful that Group of 10 central bank activity does actually slow down considerably this week heading into the Easter break. In the U.K., the Bank of England’s policy members make it easy for investors: they have undertaken ‘self-exile’ during the U.K.’s two-month election season that is officially underway.

In the U.S., Federal Reserve members are very active on the talking circuit this week with Vice Chair Stanley Fischer speaking on Monday, and Chair Janet Yellen on Thursday. Neither is expected to give any interest rate hike clues away as both are giving introductory remarks at separate conferences. On Tuesday, Federal Reserve Bank of Richmond President Jeffrey Lacker speaks on the country’s economic outlook. This ‘hawk’ is unlikely to challenge consensus of a patient Fed waiting until September or eve
n later for it to begin raising interest rates. By the end of this week’s Fed speech circuit, investors will probably be none-the-wiser as to when and how aggressive the Fed will be with respect to interest rates.

U.S. Jobs Data in View

Capital markets will probably need to take interest rate timing clues from this Friday’s U.S. NFP report. Ever since Yellen began the process of weaning investors off central bank dependence, and nudging the market toward fundamental data reliance, the U.S. jobs report has taken on much more significance. Especially since the U.S. economy has, of late, exhibited signs of a slowdown due to excessively cold weather. Many are looking for this past winter’s cold snap to have finally taken a modest bite out of NFP (expected +247,000 versus +295,000; unemployment rate unchanged at +5.5%). If that does not happen, it could reinforce how strong the underlying U.S. labor market truly is, and will have money-market traders pricing in an earlier rate hike. Investors should remain wary of any weather-related anomalies. For a more accurate rate guidance, look to the wage growth component of the report. Until now, there has been very little sign that tighter labor market conditions are supporting wage growth.

Euro Traders Seek Direction

Last week, the EUR bounced around in a contained range twice threatening to breakthrough resistance at €1.1052, before falling back to this morning’s EUR/USD lows ahead of the psychological €1.0805 handle. On the international money market, speculative EUR short positions hit new records, suggesting more covering is likely. However, there is a clear market willingness to add or establish more EUR short positions on any U.S. dollar pullbacks. The EUR bear must be feeling fairly confident with their short positions, especially with the lack of EUR bounce follow through considering the depth of the record short positions.

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