Greece remains the dish d’jour in FX. France can breathe easy…

So, as mentioned yesterday, another meeting in Brussels about Greece, another chance for Belgian caterers to rack up some overtime…

Waiting up for the decision into the wee hours of yet another morning, yielded what was almost the expected result anyway. Technical difficulties in reaching a firm decision has meant that nothing formal was declared overnight and instead yet another conference call/meeting (in a seemingly endless procession) is scheduled for next Monday (26th). Will there be a formal resolution/decision made then? Possibly, but given the track record thus far, it’s almost highly unlikely. Apparently this time the “technical difficulties” centred around agreeing what size of debt to GDP ratio Greece can attempt to target in the coming decade. The last number being bandied around was in the vicinity of 144% by 2022, sorry folks, that’s just laughable. I could’ve sworn that just months ago there was still resolute talk of 120% by 2020…
Another bone of contention (beyond the degree of char on the porterhouses being served) was how best to accommodate a bankrupt nation. Is it by allowing 75% haircuts on already accumulated debt, is it to reduce (practically to zero) the interest rate paid for this very debt or is it best to hand a crate of Ouzo to every man, woman and child and simply watch what happens…

Market reaction (given the timing) was kneejerk as could’ve been expected, with the EURUSD sold off rather quickly, but only as far as the week’s opening levels a mere number of hours earlier. Any latent stops that were resting into 1.2780 quickly got taken and frankly nearly as quickly strong bids once again appeared and swept us off the lows. Having traded down to 1.2735/7 at the low we are now firmly back to where we began yesterday (at 1.2800) with the very same stops that were left un-triggered at 1.2835 or so still in play. My preference for mean reversion in the pair remains and I think we are likely to have those stops taken today with a punt somewhere into the 1.2880 area likely before close of play this week.

On the JPY front, well… Mr. Abe has now apparently resorted to posting political mantras on his Facebook page (as reported overnight in the Nikkei newspaper) and that in itself must surely be worth a higher USDJPY as well as a few dollars upside to the price of Facebook shares… On the currency side, yes, it has proven to have done the trick and having been asked last night what I make of this overall JPY picture, my only response was that the obvious move into year end is hard to fight, but whether it will continue into the new year, in my opinion is highly unlikely. Once the dust has settled and all the players are in place when the game of musical chairs has ended by the end of Q1 next year, I think anything into the 85.00 handle on USDJPY (possibly 87 at a stretch) can very likely and comfortably be sold for a return to the 80 area. But in this current environment forecasting beyond what I might have for lunch today is clearly a futile pursuit…

With the US on a half day today, out completely tomorrow and another half day on Friday, I really wouldn’t expect too much more excitement out of this week. The SPX continues its grind higher, but here too I would expect nothing more than consolidation and for us to tread rather boringly between 1392 and 1377, if it even manages to trade that wide…

Good luck out there today folks and helmets on.

P.S. Keep an eye out for my weekly editorial this Friday, Postcards From the Edge. I’ll be taking a look at some of our favourite market headliens of recent times

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