Greece Overshadows ECB Rate Cut, RBA Minutes Preview

Even a surprise rate cut from the ECB couldnt shake the market from its focus on Greece as risk assets rallied Thursday on signs that a referendum will be averted. AUD and CHF were the top performers while JPY and USD lagged. The Asia-Pacific session will focus on the G20 meetings in Cannes and the quarterly RBA monetary policy statement. Latest premium intermarket insights linked below.

The situation in Greece is constantly in flux and that was reflected in a 200-pip range in EUR/USD with a nasty chop that made for difficult trading.

PM Papandreou appears to have given opposition parties an ultimatum: vote in favour of the bailout deal or risk the referendum. IIn exchange for a positive vote, Papandreou may have agreed to step down and new elections will be called.

Before any of that can take place, a critical confidence vote will take place on Friday. If it fails, a snap election will be necessary and the euro will fall. Its unlikely the Greek government can finance itself through an election and its unclear if the troika will payout aid with Greece in limbo.

At this point, it appears that opposition politicians will support the confidence vote and the bailout on the condition that elections are called and/or Papandreou steps down. If this scenario unfolds, the euro is likely to continue to the upside on Friday.

The Greek referendum news overshadowed a surprise cut in the ECB main refi rate to 1.25%. In his first meeting as leader, Draghi said he sees slow growth heading toward a mild recession later this year.

EUR/CHF is getting close to the danger zone as it touched 1.2130 on Thursday. A break below the September low of 1.2116 would certainly trigger concern at the SNB.

In the US, economic data was mixed. The ISM non-manufacturing index fell to 52.9 from 53.0, missing the 53.5 expected. On the bright side, the employment index jumped to 53.3 from 48.7 in what is often a telltale indicator for non-farm payrolls. Initial jobless claims fell to 397K compared to the 401K expected.

Aside from Greece, the chief risk to sentiment is Italy where bond yields rose to a fresh euro-era record on reports of political turmoil and the failure to immediately implement economic reforms.

The S&P 500 gained 1.9% to 1261. With the ECB, Fed and RBA decisions now complete its clear that global central bankers have taken a dovish turn this week. The winner, in that sense, has been gold which broke out above $1752 on Thursday.

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Asia-Pacific Preview

The G20 meetings in Cannes continue. Proposals to injecting billions into the global economy via a special allocation of SDRs and advancing the IMF credit line proposal may boost confidence.

At 0030 GMT, the RBA will explain this week's rate cut at its the quarter monetary policy statement and update its assessment of the economy.