Tumult, Trouble and the Titanic

A flash of optimism from European and Greek leaders sparked a flash comeback in markets Tuesday. The US dollar gave up much of its gains but remained the top performer while the pound lagged. Japanese trade balance is due later.

Watching the rebound in markets today we're reminded of the movie Titanic. A calm briefly comes over the passengers when the doomed ship briefly rights itself. The sinking euro bobbed to 1.1050 from 1.0918 in a snapback rally as sentiment turned around. A rout in stocks turned into solid gains as well.

The lows of the day came as Greece appeared to show up empty handed at the eurogroup meeting. Finance ministers were miffed that Athens didn't have a fresh proposal. We touched on the unfolding dynamic yesterday: In order for the euro to tread water, it needs a steady-stream of positive news and progress on Greece. The minute that stops, it begins to sink.

Sentiment had turned extremely sour after the eurogroup but European leaders were more upbeat. Italy's Renzi said a deal could come within hours and then reports began to appear about a two-part Greek proposal that would include bridge financing and a 2-3 year deal.

There was also a clear change in tone from top leaders as they seemingly want to get Greece on the backburner rather than roiling markets in a delicate global economy. Each of the Premium longs in EURAUD and EURCAD are +100 pips in the green. Today's GBPUSD trade was stopped out by 15 pips. EURUSD remains in progress. A new CAD trade will be issued in the next 24 hours, ahead of Friday's important Canada jobs report.

Still, Athens has been woefully underprepared for winning the referendum and they are slowly squandering their momentum. These deals rarely come together without a deadline and the latest one is a July 20 payment to the ECB.

What could eventually overshadow Greece – whatever the result of the negotiations – is trouble in China and commodities markets. Metals joined yesterday's oil rout and signals about global growth are worsening.

Prices for metals will be the focus of Asia-Pacific trading but that will be briefly interrupted but the Japanese trade balance report at 2350 GMT. Trade has been a pillar of the early-year strength in Japanese economy but there are questions about if it's a one-off bounce or a sign of better competitiveness due to yen weakness.