Talking Points:

Euro May Overlook Eurozone Finance Ministers’ Meeting on Greece Bailout
Aussie Dollar Gains, Kiwi Counterpart Drops on Evolving Rates Policy Bets
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Greece returns to the spotlight in European trading hours as Eurozone Finance Ministers convene to decide on whether to approve the beleaguered country’s third bailout. Germany has expressed reservations about the deal that could unlock as much as €86 billion so approval at today’s sit-down would go a long way toward warding off fears that the arrangement may unravel.

The outcome seems unlikely to drive significant Euro volatility however considering the markets’ relatively sanguine disposition on the entire fiasco. Indeed, Greek 10-year bond yields have dropped to the lowest level since early March, pointing to ebbing credit risk and signaling investors are willing to continue giving Athens and its creditors the benefit of the doubt.

This seems to make sense. The lion’s share of Greek debt is held by EU institutions and the IMF rather than the private markets. This effectively cuts off contagion risk in a worst-case default scenario. While an exit from the Euro area would almost certainly unnerve investors if only because it would be unprecedented, the probability of such a turn of events seems distant enough to discount (at least for now).

The New Zealand Dollar underperformed in overnight trade, falling as much as 0.8 percent on average against its top counterparts. The move tracked a drop in the benchmark 10-year bond yield, hinting selling may have been driven by firming RBNZ interest rate cut expectations.

The dovish turn in traders’ policy outlook may have followed a disappointing set of Retail Sales figures. Receipts rose just 0.1 percent in the second quarter, falling short of expectations calling for a 0.5 percent increase and marking the weakest result in over three years.

By contrast, the Australian Dollar traded broadly higher, adding as much as 0.5 percent against the majors. Evolving monetary policy bets looked to behind as well as supportive comments from RBA Assistant Governor Kent poured cold water on rate cut speculation.

The head of the central bank’s research and analysis divisions said the jobless rate has stabilized, with the labor market adjusting more smoothly than expected. Kent added that the RBA will keep an open mind on the direction of the official cash rate, highlighting an absence of a dovish lean despite policymakers’ decision to ease as recently as May.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

22:45

NZD

Retail Sales ex Inflation (QoQ) (2Q)

0.1%

0.5%

2.3%

02:50

CNY

Foreign Direct Investment (YoY) (JUL)

5.2%

5.0%

0.7%

03:00

NZD

Non Resident Bond Holdings (JUL)

69.7%

–

69.7%

European Session

GMT

CCY

EVENT

EXP/ACT

IMPACT