Greece Exhibits Expansion

Analisi Giornaliera - 14/08/2015

Greek Economy Manages to Outperform Other Regional Peers

Data delivered yesterday showed the Greek economy surprising returned to positive growth after several years of continued decline with the uptick in growth seen as a positive for the outlook. The rest of Europe is not faring as well as evidenced by weaker than expected German and French economic activity and missed GDP expectations.

Greece Grows

After years of contraction, the Greek economy managed to show the first signs of growth in the second quarter, with the economy expanding by 0.80% against expectations of further annualized losses. The weak economic backdrop has contributed to a continued slide although the revision higher of the first quarter numbers coupled with the strong showing in the second quarter are raising the prospect of a nascent recovery underway. Nevertheless, the imposition of capital controls over the summer might defeat that optimism as withdrawal limits impacted spending and growth across the board. Greece is in the final stages of voting on the latest bailout program which stands as the last hurdle between the country and receipt of a new round of aid. This comes at a critical time with an ECB repayment due on August 20^th and no existing bridge financing with which to pay the debt.

Retail Spending Multiplies

American consumption witnessed an uptick as the latest retail data showed a rebound in the figures while the prior numbers were revised higher after previously showing contraction. This comes after retail data missed analyst expectations for nearly 6 straight months with the consumer outlook continuing to deteriorate. However, from a policymaker’s perspective, this will prove another feather in the Federal Reserve’s cap as they attempt to discern the possibility of a September rate hike. Nonetheless, some figures do not support higher rates, namely the unfolding credit bubble in subprime auto-lending and the student loan bubble which continues to grow to record levels. Moreover, business inventories have climbed to stunning heights, climbing 0.80% month over month in June in the quickest pace since 2013, a worrying sign for the consumption narrative. The dollar managed to stage a rebound after several straight sessions of losses, with gold prices retreating back below $1120 per troy ounce.

Oil Prices Continue Slide

Prices of crude oil plumbed new multi-year lows yesterday as concerns about the state of the global economy overtook optimism that the oversupply conditions might be abating following the drop off in American production and continued inventory draws. The increasingly accommodative nature of central banks and their efforts to devalue currencies highlight the weakness inherent in most developed and emerging economies as policymakers struggle to stimulate growth. With few options on the side of monetary stimulus left, most banks are reverting to currency intervention to achieve goals. The ascension of the dollar has also weighed on prices, but the IEA report seems to hold the most water as the rationale for oil prices to continue tumbling and stay lower for longer. While the spread between Brent and WTI has widened back to more normal historical levels, another tightening could spell further near-term downside in oil prices.

EURGBP Equidistant Channel Technical Pattern

The Euro continues to appreciate versus the Pound as stronger economic data supports the Euro’s ascent versus peers. Although today’s GDP numbers from across the Euro Area have dented some of the recent momentum higher in the pair, UK economic data has also taken a turn as both nations once again must contend with potential deflationary forces. The equidistant channel pattern emerging in the EURGBP pair has a bullish bias with ideal positions initiated at the lower channel line targeting the upper channel line. A move below the lower channel line could be indicative of a channel-based breakout to the downside to be accompanied by renewed momentum and volume lower. Fighting the existing near-term uptrend is not suggested due to the widened risk and narrower reward potential.