Euro Drops Below 1.29 as Greek Deal Remains Elusive

Euro opens lower in Asia after creditors failed to reach an on cutting Greeces debt by ahead of Mondays meeting of Eurozone finance ministers. AUD and GBP were Fridays top performers while EUR and CAD lagged. Fridays CFTC data showed euro shorts creeping higher once again. EUR and CAD fall, Euro shorts edge to fresh record.

Creditors and Greek negotiators were close in reaching a deal that would cut the net long-term value of bonds by at least 65%. Although the head of the creditors group, Charles Dallara did leave Athens, he said discussions were ongoing and changes were possible. Since a deal was priced in, the lack of agreement pushed EURUSD below 1.29 in early Asia trade.

Meanwhile in Friday, the Canadian dollar slumped on diminished expectations for Bank of Canada rate hikes after December inflation figures fell well short of expectations. Headline CPI fell 0.5% in the month compared to the -0.2% expected; core CPI missed by a similar margin.

The trend in Canadian inflation has clearly slowed. Although policymakers continue to express concerns about high household debt and overvalued housing prices due to low interest rates, the absence of inflation will force them to keep rates unchanged for the remainder of 2012.

US existing home sales increased 5% in the month but fell just shy of expectations. The S&P 500 was flat at 1314.

CFTC Commitments of Traders

The data is through the close on Tuesday so its not a surprise that EUR shorts continued to expand. Unless we see a turnaround in EUR fortunes early next week, its probable that euro shorts will diminish in next weeks data.

EUR shorts increased 2K to -158K

GBP shorts increased 4K to -42K

JPY longs fell 1K to +59K

AUD longs increased 1K to +54K

CAD unchanged at -29K

NZD longs increased 4K to +9K