Euro, Yen Anxiously Waiting for Greece Negotiations Outcome

Talking Points:

Greece Debt Woes in Focus as Eurozone FinMins Gather Anew in Brussels
New Zealand Dollar Gains as News-Flow Underpins RBNZ Policy Outlook
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All eyes are on Brussels to start the trading week as nervous markets prepare for another round of negotiations between Greek and EU officials over the country’s debt woes. A similar sit-down produced no results last week and the situation looks increasingly intractable: Greece’s government won a key confidence vote, confirming its mandate to scrap the existing EU/IMF bailout program. Meanwhile, German Finance Minister Wolfgang Schaeuble bluntly dismissed rumors of a 6-month extension on Greek debt repayments as “wrong”.

Both sides face negative fallout without an accord. Eurozone officials don’t want to endanger the bloc’s structural integrity by setting a precedent for a country to leave, an outcome with unknown consequences. Meanwhile, the newly-minted Greek administration surely understands its survival depends on ending economic hardship, which voters equated with EU-imposed austerity. Its fortunes might swiftly turn if a disorderly “Grexit” fails to end the malaise or compounds it.

With that in mind, it seems reasonable to suspect that some kind of accommodation will be reached.Political brinksmanship has been the status quo throughout the Eurozone debt crisis, so more of the same before a stay of execution is cobbled together is not surprising.Still, the possibility that the two sides fail to find common ground remains an acutely real one, shrouding the outlook for the Euro and sentiment-sensitive currencies like the Japanese Yen in uncertainty.

The New Zealand Dollar outperformed in overnight trade, rising alongside the yield on the island nation’s benchmark 10-year bond yield, as an upbeat set of economic data releases pushed back against RBNZ rate cut expectations. January’s Performance of Services Index showed factory-sector growth accelerated to the fastest pace in four months. Meanwhile, the four-quarter Retail Sales report revealed the biggest increase inflation-adjusted increase in receipts since mid-2012.

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