Focus still On Europe

A week on from the Euro favourable elections in Greece and the focus remains on Europe with yet another major summit scheduled for Thursday and Friday this week. Over the weekend, European heavyweight leaders Germany, Italy, France, and Spain met to discuss a new growth plan of about €130 billion whilst Germany’s Merkel remained under pressure to accept more flexibility on European rescue funds.

The Greeks have tabled proposals that would see them given an extra two years to meet Government deficit targets and cancel plans to lay off 150,000 Government workers. They have also proposed clamping down on tax evasion, lowering GST on bars, restaurants and Cafes and raising income tax rates. The Germans will resist much of these, but some sort of compromise seems likely which should boost markets later in the week.

The other big focus will be on Japan where the Government has appointed two new members to the Bank of Japan Monetary Policy committee. Both new appointees are in favour of more monetary policy stimulus, so the markets will be watching for the traditional end of quarter intervention that the Bank of Japan use to help improve the rates Japanese exporters can convert their receipts at.

For the week ahead on the data front, we have US new home sales out on 26th with New Zealand’s Trade Balance out on Wednesday. Towards the end of the week we have the European 2 day summit in Brussels, as well as Eurozone retails sales & consumer confidence.

On the currencies this morning, the Kiwi & Aussie start the week little changed against the USD at .7900 & 1.0040, whilst the NZDAUD cross start the week higher back around .7850.. The Euro continues to hold just shy of .6300 and the Japanese yen starts the week off back above 63.50 on continued speculation that the nation will once again intervene to offer some relief to their exporting industry.

Talk of traditional end of quarter intervention has seen the Yen weaken