Euro Down on Deal Doubt

European leaders responded to Greece's proposal with an ultimatum that demands immediate legislation and a veto in Greek parliament. The euro opened a half-cent lower and the yen is broadly higher. The Asia-Pacific calendar in the day ahead is light so the focus will be on Greece and Chinese stock markets.

The Eurogroup gave Greece two options 1) take a five-year 'time-out' from the Eurozone 2) Enact legislation by July 15 to unlock emergency funds and begin negotiations on a third bailout.

Passing the legislation would be a capitulation for Tsipras and Syriza. There are six demands including a VAT hike and pensions cuts, which are two of Syriza's 'red lines'. From there it gets worse as officials from Greece's creditors want full access to government ministries and a veto over relevant legislation. They also want workers laid off and 50 billion euros of state assets transferred to a fund in Luxembourg; a clause that may be the most problematic.

Greek banks will almost certainly remain closed next week as there are no provisional lifelines. The ultimatum isn't yet final and it could be watered down but the focus is now on the reaction from Athens. Syriza lawmakers are calling it a 'humiliation' and even if they wanted to, it may be technically impossible to pass the legislation before July 15.

The euro fell to 1.1089 in early trading but has rebounded to 1.1116 from 1.1175 at the close on Friday.  The early market reaction may understate the grave situation. If Syriza balks today, a Grexit is virtually assured.

The other main weekend negotiation was in Vienna where Iran and nuclear powers met. Talks have been tense but are reportedly making progress ahead of tomorrow's deadline. The result will be critical in oil markets in the days ahead.

A few items on the calendar include Chinese money supply, foreign reserves, Australian credit card purchases and a third reading on Japanese industrial production but none is likely to move markets.

Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.

EUR -99K vs -99K prior

JPY -64K vs -79K prior

GBP -23K vs -13K prior

AUD -22K vs -12K prior 

CAD -32K vs -23K prior

CHF +6K vs +7K prior