Euro Rebounds as Greece Finds the Funds

Last week, the FX market grabbed onto second-tier economic data like new home sales as a reason to move the dollar. This week, the options are even thinner with no notable US economic data until Friday.

Instead, traders were looking to Greece on reports of the country running out of money. But a decree ordering local governments to send excess liquidity to Athens appears to have relieved the pressure and there is speculation Greece may have bought enough time to hold out until June.

At the same time, the tone from Greece is starting to improve with Varoufakis seeing a 'clear convergence' and a prediction of a deal – although not this week. The euro had fallen on a soft ZEW in European trading but it recouped all the loses and more in a rally to 1.0780. It later slipped back to 1.0735, finishing the day virtually unchanged.

Overall, it was a choppy day of trading. USD/CAD was strong and rallied to 1.2305 as oil prices slipped. The key level in the day ahead is 1.2352, which was the bottom of the Jan-March range.

But the immediate focus will now shift to commodity cousin AUD. In a dollar dip Tuesday, it climbed as high as 0.7755 and recouped all the losses from Stevens and the RBA minutes. It later sagged back to 0.7709 with CPI numbers due at 0130 GMT. Australian inflation is reported only quarterly so it has an extra impact. It's expected at +0.1% with a trimmed mean at +0.6% m/m. A soft reading would clear the way for a May rate cut and would likely send AUD/USD back to 0.7600 and lower.