Greeks Approve Last Minute Proposal

Analisi Giornaliera - 23/02/2015

After a Week of Wrangling Greece Formed an Understanding With the Eurogroup

Description: In an effort to extract the maximum benefits from any deal with the Troika, the Greeks struck a last minute bargain with the Eurogroup to extend the terms of the existing bailout conditions by 4-months. Although not finalized, the deal has left the Greek government at odds with its constituents as voters feel betrayed by Syriza.

Bailout Extension

In a complete betrayal of their campaign promises to voters, Syriza Finance Minister Yanis Varoufakis agreed in principle to an extension of the current bailout terms with minor changes to the phrasing of the conditions. The last minute deal was struck just before the negotiation deadline while leaving Greece in exactly the same position it started at. While Greece has until the end of the day to submit its reform proposals to the Eurogroup, this stunning turn of events is unlikely to be met with optimism at home as party members and voters rebel against the latest measures. The latest deal is unlikely to change the status quo or the inevitable default facing the Greeks. EURUSD soared on the agreement, rallying nearly 150 pips before pulling back, erasing half the move.


Stocks Soar

Benchmark equity indices greeted the Greek deal with optimism, with the S&P 500 hitting a new record. However, this rally needs to be met with caution following commentary earlier in the week taken from the FOMC Meeting Minutes which highlighted the “stretched” nature of equity valuations. Aside from the warnings from the Federal Reserve, revenue estimates for S&P 500 constituents have been cut to negative growth for the first time since the last financial crisis began in 2008. Earnings projections have also been cut to nearly a quarter of estimates from the beginning of 2015 as economic headwinds and a stronger dollar impact foreign earnings for American multinationals. Quarterly GDP data to be announced on Friday will likely confirm the slowdown facing the economy as global trade decelerates.


The Week Ahead

Central Bankers will be dominating the headlines in the week ahead as speeches are expected from many of the globes largest policymakers. The Bank of England’s Governor Mark Carney leads off the week which will also include testimony from Federal Reserve Chairwoman Janet Yellen and comments from ECB President Mario Draghi. All of the Central Bankers are likely to discuss inflation as it relates to economic growth and the potential downside risks. Aside from the acknowledgement of deflationary forces, discussion of interest rate policy and future rate hikes will be carefully monitored by analysts and traders as individuals seek to nail down a more concrete timeline for more hawkish policy implementation.


AUDUSD Ascending Triangle Technical Pattern

The most recent surprise move by the Reserve Bank of Australia to drop interest rates to 2.25% saw the AUDUSD currency pair touch multi-year lows before prices rebounded modestly to the upside. Since retracing the move lower, AUDUSD has set up into an ascending triangle pattern which incorporates a bullish bias with expectations of an upside breakout. Weakening American macroeconomic data and the possibility of a pullback to recent dollar strength could prove the fundamental catalysts for any further upside in AUDUSD. Resistance at 0.7850 is the upper bound of the pattern with the prevailing uptrend containing the consolidation in prices. A move above resistance would be considered a breakout with potential upside of 125-150 pips while a move below the trendline to be considered a reversal in the AUDUSD pair.


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