Morning Commentary: Greece Assets – On Fire!

Foreign Exchange - Morning Commentary

Greece Assets – On Fire!

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Alan Rose
Alan Rose
Foreign Exchange Senior Trader
As we arrive this morning, markets are back in “risk-off” mode once again. Global equities, G7 interest rates, and commodity prices are all in the red with the U.S. dollar stuck remaining range bound retracing similar territory over the past three days. Readers should anticipate that markets will continue to exhibit random price action with short term trends suffering from exhaustion and reversing course until there is more clarity about the state of the U.S. economy and future Fed policy. The Fed meets on June 19.
Off of the radar screen and getting very little attention for most of this year, and in particular the past two weeks, is the fact that Greek assets are on fire. The Greek benchmark equity index has surged 38% this year and Greek 10-year bond yields have fallen sharply from nearly 4.40% in January to 2.82% today. GDP rose 2.1% in 2018 and is forecast to rise by 2.4% this year. The UR remains very high at 18% but well below the 28.4% in February 2014.
Part of the surge in Greek equities and bond prices is the result of the EU elections on May 26 where the current government suffered massive losses and expectations are rising for a more business friendly government to take their place. After being viewed as a market pariah for many years after being bailed out three times and limping from one austerity package to another, this most recent news is a welcome sign of returning back to economic recovery.
  • The Central Bank of Turkey left interest rates unchanged at 24% as generally expected. Inflation continues to remain problematic with CPI coming in at 18.7% in May.
  • May U.S. CPI rose just 0.1% meeting market expectations. Ex-food and energy came in below expectations at just 0.1%. CPI YoY dropped from 2.0% to 1.8%; CPI ex-food and energy also dropped YoY from 2.1% to 2.0%. U.S. interest rates fell on the news, but U.S. equities have rebounded to be opening nearly unchanged.
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