Risk Factors Driving Haven Flows

The Euro has reversed lower from a recent technical bounce as expanded fears of a Greek exit and the ECB’s quantitative easing program sees the EURUSD pair resume the longer-term trend in the common currency. Greece is desperately trying to scrape the funds together for upcoming repayments, but more important is the approaching dialogue with Russia as Greece finds itself pivoting from traditional partners. Today marks the deadline for Iran reaching a framework solution with the West, with the sides still remaining at odds over several points. If a deal is reached today, Iran has already highlighted its ability to bring an additional million barrels per day of oil production online within mere months as crude sits offshore in tankers waiting for sanctions to be lifted. Any failure to form a compromise could see hostilities in the Middle East reach new heights as a power struggle between nations ensues.

The Asian session shrugged off the optimism of American markets with regional benchmarks trending mostly lower. The losses were led by Japan which saw the Nikkei 225 Index give up -1.05%, followed by the -0.74% loss in the Shanghai Composite. This comes amid rumors that the People’s Bank of China is set to ease policy further with another rate cut. Although it was unfounded, it is likely around the corner as Chinese policymakers continued with a broad slowdown in economic activity. The Australian dollar has been notably weaker as traders prepare for next week’s Reserve Bank of Australia interest rate decision which might see the Central Bank reduce the key rate by another 25 basis points. With tumbling commodity prices and weaker Chinese imports threatening key local industries, the pressure to reverse the situation sits squarely on the Reserve Bank of Australia.