Greek Uncertainty Weights, Aussie Jobs Up Next

Continuing concerns about the ability of Greece to meet the growing list of demands from European leaders weighed on the euro on Wednesday. On the day, NZD led and EUR lagged. The Australian jobs report is the key upcoming event.

It now appears, at the very earliest, that Greek bailout approval will come Monday with the bond swap beginning at the same time. The risks are growing that those deadlines will be pushed back and there are even rumours that bailout funds will not be fully released until after a Greek election.

The uncertainty sent the euro from 1.3160 at the start of US trading down to 1.3060 after falling as low as 1.3043.

So far, the risks appear to be contained to Europe as other risk trades improved despite the growing uncertainty. Economic data also helped sentiment as the Empire Fed improved to 19.5 from 7.5 last month. Industrial production was unchanged but December data was revised to +1.0% from +0.4%. Even housing is showing some life as the NAHB home builders sentiment survey rose to a four-year high.

The FOMC minutes were highly anticipated but did not offer a conclusive reading on QE3. A few members advocated for more asset purchases but more wanted to wait for a decline in inflation. There was also some positive talk about economic improvements. Separately, the Fed Fisher said QE3 was a fantasy of Wall Street. With many Fed members this would be a revelation but Fisher is an arch-hawk and speaks only for himself.

Asia-Pacific Preview

The first data point to watch for comes at 1900 GMT with the Melbourne Institutes measure of consumer inflation expectations. There is no consensus estimate but a reading significantly below the 2.8% expected could re-invigorate talk about rate cuts.

The more important report comes at 1930 GMT when January employment figures are released. The consensus calls for a 10.9K rise after a 23.3K contraction last month. Despite the improvement, the unemployment rate is expected to climb to 5.3% from 5.2%.