1- European Central Bank about to beef Greece
The European Central Bank (ECB) is growing increasingly concerned about the pressure being exerted on the Greek central bank by the Greek government. The relationship between the two is made more difficult by the fact that the head of the Bank of Greece is Yannis Stournaras, the Finance Minister of the last government, who probably has different ideas on resolving the situation to that of the current government. The ECB will consider writing a formal letter of complaint to the Greek government should this continue.
2- Greece is back to recession
Another blow for Greece yesterday was economic data that shows they’re back in recession. The contraction of 0.2% last month follows on from Q4’s 0.4% decline which makes it an official recession. This is bad news, as it will mean falling tax revenues and also more disquiet from Greek citizens.
3- Eurozone economic growth beat the UK
On the bright side, Europe’s GDP numbers were encouraging though, with only Greece and Finland in recession. The Eurozone economy grew at a faster rate than the UK’s during the first quarter of this year, topping off a stream of recent data suggesting the bloc is emerging from a long period of stagnation.
4- More countries on EU’s trouble list
Finland has struggled to pus on since it came out recession last time in 2014 and falling back into it won’t help keep Europe happy, as it likely means that Finland will be on the wrong side of European budget deficit rules, which could lead to fines from the EU. This could cause problems with the new Finnish coalition government, who have a minority party in that coalition that are right-wing euro-sceptics.
Finland isn’t the only country that might fall foul of the rules though. The UK has been warned by Brussels that last year’s budget deficit of 5.2% is unacceptable and will be monitored for the next two years. If George Osborne fails to bring this back below 3%, which hasn’t been done since 2006/7, then fines will apply.
5- EUR/USD Technical Analysis
EUR/USD: Reached and surpassed our bullish target of 1.1263
Trading idea: Bullish targeting 1.1772
Technical analysis: Not only the pair danced all the way up to a key resistance level of 23% Fibonacci and our bullish target of 1.1263, but also confirmed above it. The pair remains aboe Ichimoku cloud, and the RSI is heading up towards the oversold area. The MACD line is chasing the signal line above the histogram.
Alternative Scenario: If the pair breaks inside the Ichimoku cloud or the pivot zone, look for further downside back to the 1.05 level.
Where I’m setting my stops and limits:
|Support Levels||Turning Point||Resistance Levels|
Oil, China and Economic Calendar
Shale oil producers in the US are getting ready to turn the taps back on once the oil price rises another $10. Such a return of supply to the market would almost certainly cap gains in oil prices for the rest of the year. There’s also a report in the FT that fracking could unlock 140bn barrels of oil worldwide. This is equivalent to all of Russia’s known reserves and could mean that China is able to develop its own large scale oil production.
From China, we’ve heard that the government is to impose a debt swap on banks, forcing them to refinance local government debt at much lower coupons to the existing arrangements. The move is designed to unburden local governments who have struggled to refinance as banks aren’t interested in taking on such illiquid debt.
Today’s economic calendar is much quieter than yesterday’s. We’ve only got US jobless claims and producer prices and Mario Draghi speaking at the IMF in Washington. Both of these items could move markets, but hopefully in a much more timely manner than we’ve seen over the last couple of sessions.