Data/Event Risks
FX: Data and events for today are fairly thin, keeping volatility risks on the low side. The main focus for markets will be the implications of the deal put together overnight on Cyprus.
Idea of the Day
Negotiations that took most of the night lead to a deal this morning that will see Cyprus receive its EUR 10bln bailout from the troika (EU, ECB and IMF). The deal excludes depositors under EUR 100k from the deposit levy, although the actual amounts on the remainder have yet to be fully determined.
EURUSD rallied some 60 pips on the news, taking it back above the 1.30 level. The single currency had been relatively buoyant on Friday, despite the on-going negotiations over Cyprus, so this helped to limit the relief rally seen overnight. Plenty of uncertainties remain, so this could well serve to limit the potential for further gains on the single currency and there’s no doubt that the EU’s reputation has been damaged by the handling of events over the past week 9 days.
Latest FX News
- EUR: The Cyprus deal allowed for a modest overnight rally, but Europe may struggle to follow through. The single currency was notably buoyant on Friday, so this will also limit the scope for further gains.
- GBP: Sterling put in a strong performance during last week, with a number of factors combining to offer support to the pound.
- JPY: Quiet in terms of news, but interesting on the charts as the bull channel on USDJPY that has broadly been in place since mid-November is close to being broken on the downside. Lower channel comes in at 93.96 today so if broken, the weaker yen story will be that much harder to sell.
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