Imagine my surprise when I got up this morning and saw EUR and AUD fizzled last night after impressive data points were announced.
European politicians are saying that an agreement with Greece will come as early as next week. The market seems to have priced in a deal deal with Greece and its creditor - even if another "kick of the can." Whatever the scenario the EUR will come under pressure once this is resolved.
The only way this issue is solved is by printing more money. For example, if the ECB decides to reduce Greece's outstanding principal then you're going to have every other member of the euro zone asking for the same kind of treatment - which they're likely to get. This will devalue the currency.
If Greece leaves the euro then the ECB is going to have billions of euro worth of nonperforming debt which will only be able to pay by printing more money.
The market seems to understand this because it has capped EURUSD to 1.15. Our analysis points to the EUR devaluing versus all major currencies not because the EUR will be doing poorly economically versus these other economies but because of the structural problems the EU has to solve.
Australia had a fantastic job's number last night. The market was expecting 11,000 new jobs being created during May but the number was 41,000, almost 4 times consensus. AUDUSD jumped but as the night wore on the gains were given up. This shows that even a great number can't take away from the macroeconomic forces that Australia and Asia are currently facing.
All eyes are currently on the employment and inflation data that is being released in the United States. This will be the case until it's not. There is a high likelihood that the US will continue to disappoint when they release these figures; however, the spikes in the dollar-denominated pairs should be faded.
We continue to buy the dollar during the spikes. Hopefully we won't have to deal with the drama today from another US miss on retail sales or jobless claims but if we do look to buy the dollar on the spikes.