Euro Finally Stalls, Greece Raises the Stakes

The euro built on its largest two-day gain in 6 years with yet another surge early in European trading but it reversed to close lower in a sign that the squeeze may have stalled, especially with Greece asking to delay IMF payments. On the day, the pound was the top performer while the Aussie lagged. Lower tier data from Australian and Japan is due later.  

 The euro squeeze hit 1.1380 before it finally stalled but then closed near the lows and continued down to 1.1214 in early Asia-Pacific trading. That came despite yet another compression in the spread of Treasuries over Bunds.

The catalyst for the most-recent 50 pips lower in EUR/USD has been increasing murmurs about trouble in Greece. As recently as yesterday, Greece had promised to pay a €312m loan due to the IMF on Friday. That changed late Thursday as Athens asked to skip the payment and instead pay at the end of the month.

What does it mean? It's beginning to look like a game of chicken. Greece may be saying that it will preserve what's left of its war chest if talks don't improve and default. An unnamed EU official cited by Reuters afterwards said it was “not a good sign” and that “it will be difficult from here”. That leaves the euro in a vulnerable place.

The day ahead will be massive in terms of news and data. Not only are EU leaders meeting (without Greece) in Berlin, but the OPEC decision is also due along with US and Canadian jobs reports.

Market participants will have a chance to digest and prepare during a relatively light Asia-Pacific session. The highlights are The Australian AiG performance of construction index and Japanese leading indicators but both rarely move markets.