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Greek Default Rumor Sends Euro Plunging

Reports Circling That Greek Government Preparing to Default Unless Accord Reached with Creditors

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Although categorically denied by the Greek Government, a Financial Times report citing unnamed officials highlighted that Government will hold back on repaying the EUR 2.5 billion IMF obligations due in May and June. This may be construed as more empty threats from the Greeks, but the rest of the Euro Area has been quietly preparing for this moment and is unlikely to acquiesce to further demands for bailout funds.

Greece Default Back on the Table

It is a story that has been told several times before, but with the nation struggling to find the cash to pay public workers and pensioners, the end may be close for Greece according to a recent Financial Times article. The rumors remain unsubstantiated and the Greek Government fired back with a rebuttal, but the numbers do not lie. Without the EUR 7.2 billion in funds promised under the second bailout agreement the government will be unable to meet its IMF obligations in May which number just shy of EUR 1 billion in May and EUR 1.6 billion in June. This is raising the specter of capital controls for the nation as the Government feverishly plans for the day after default. This is also increasing speculation that other nations in the Euro Area like Spain will require an imminent restructuring of debt after the Government called for talks with creditors.

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eurgbp04142015

Putin Lifts Ban on Advanced Weapons for Iran

In another move that will likely stoke tensions in the Middle East further, Russia announced yesterday the lifting of a ban on exporting the advanced S-300 missile system to Iran. With hostilities in Yemen growing with every passing day, the existing proxy war between the Iranian-backed Houthi Rebels and Saudi Arabian-backed Hadi Government has a high probability of igniting a wider regional conflict. The latest Russian move is also likely to encourage an arms race amongst regional powers as they seek to maintain or grow hegemony from a political, religious, and economic standpoint. The conflict has managed to keep oil prices elevated despite growing global inventories however the futures curve is presently flattening to the downside as expectations for an oversupplied environment remain. With storage capacity forecast to run out by the end of May, the next leg lower will be highly dependent on upcoming inventory numbers.

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cl-may1504142015

Technology Leads American Stocks Lower

Even with the advanced merger talks between Nokia and Alcatel bolstering expectations for further deal-making in the technology sector, American equity benchmarks trended lower on the session with losses in Apple dragging on valuations. Technology companies are meanwhile using trade groups to lobby the Chinese Government to lift the ban on foreign technology products citing the inefficiencies of present technologies operated in the world’s second largest economy. This could prove a boon for technology providers, but is likely to encounter substantial resistance from the Chinese Government especially in the wake of the NSA spying scandal. The drop in equities was led by the -0.46% decline in the S&P 500 followed by a -0.45% decrease in the Dow Jones Industrial Average. The Nasdaq Composite briefly rose above 5000 before sliding in-line with other indices.

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nsdq-jun1504142015

USDJPY Equidistant Channel Technical Pattern

The Yen has gained substantially after comments from Shinzo Abe’s Special Advisor Hamada citing the weakness in the Yen sent the currency soaring. In his remarks, he noted that USDJPY at 105.00 was more suitable for the economy when compared to present levels. However, without a change in course from the Bank of Japan, the USDJPY is likely to continue its appreciation considering the epic quantitative easing bonanza the Central Bank has unleashed. The weakness in the pair contrasts with other major currencies which have depreciated as a result of the latest dollar momentum. The upward trending equidistant channel setting up in the USDJPY pair setting up since March has a bullish bias, with weakness expected to be temporary. Trend following strategies are an ideal way to take advantage of the technical pattern while fighting the trend will likely diminish reward characteristics for the trade.

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usdjpy04142015annotated

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