Greece Starts Aid Talks Risk Appetite Returns

Greece has begun talks with the International Monetary Fund and the European Commission over the terms of the aid package. The biggest question is not if Greece needs it, which it does, but rather when will they need it the most to ask for it. The IMF has stern terms on its loans and in the next ten days along with Greece and the EC they must reach the conditions and interest rates that will apply to the bailout. The offer on the table is for 40bn Euros (30bn from the EU and 10bn from the IMF).

The IMF has also proposed a new bank tax that would fund future bail outs. This will be a hot topic in the next G20 summit coming this weekend. Bankers around the world will be hanging on every word that hits the wires this weekend as this tax proposal will impact wages and reclassification on what activities a bank can engage on.

The US$ is mixed in the O/N trading session. Currently it is higher against 7 of the most actively traded currencies in a ‘whippy’ trading range. The USD$ is higher against the EUR -0.06%, , JPY -0.10% and lower against CHF +0.14% The commodity currencies are a stronger this morning, CAD +0.47%% and AUD +0.12%%. The Bank of Canada issues a rate statement this morning. The market expects no change to the rate at 0.25%, but there is anticipation on the language used as it may signal a rate hike for the next meeting. The AUD appreciated 28% in the past 12 months but as global central banks are unwilling to increase rates and the threat of China revaluation are looming. The market expects the RBA to increase rates in their next meeting in May (0.932).

Forex heatmap

Crude is higher in the O/N session ($84.31 up 46c). As the market digests the continuing Goldman saga, a lower forecast of this week’s oil inventories has boosted the price of the black stuff. The crude rally is being threatened by OPEC members breaking the agreed production quotas. This coupled with the lower demand for oil. OECD nations have decreased their demand 8% compared to 2006 numbers. US Dollar strength has put downward pressure on oil as the Greek tragedy has a new player in Goldman. The combination of US Dollar strength and US growth weakness paints a negative picture for crude demand.

Equities gave Gold a boost after the metal had touched a two week low earlier last week to offset the effects of Goldman and Greece. Inflation signs around the globe have given Gold some of its luster back as an inflation hedge USD$ ($1,145). Palladium continues its climb at this morning it reached a new two year record level.

The Nikkei closed at 11,090 up +190. The DAX index in Europe was at 6,265 up +2; the FTSE (UK) currently is 5,748 down +35 The early call for the open of key US indices is higher.

Note: Dean will be away traveling for the next two week’s and will return to publication on April 29th.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza