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The Euro traded slightly lower after the Greek parliament voted155 in favor, 138 against, Prime Minister George Papandreou’s proposed €78 billion medium-term austerity package that now will ensure the next tranche from the European Troika. After one member of the ruling party Pasok party dissented, the EUR/USD pair swung wildly, at approximately 12:44 GMT, sending the pair in an approximate 90-pip spiral. The Euro-Dollar rebounded quickly, however, as it became clear the vote would pass regardless. Following the vote, Prime Minister Papandreou dismissed Pasok Deputy Kouroumplis Panagiotis for breaking party lines. Euro-Dollar 1-minute Chart: June 29, 2011
Charts created using Strategy Trader– Prepared by Christopher Vecchio
Before the news, the basket of commodity currencies surged in the Asian and European sessions as it became increasingly clear that the Greek parliament would pass the medium-term measures required by the European Troika for additional bailout funds. Indeed, it’s clear that without the passing of the austerity package, the European Union and International Monetary Fund would not clear the way for an additional €12 billion of funds that would prevent a default in July for Greece; Greece currently needs another €10 billion to close the gap in their projected budget (up to €350 billion from €340 billion for the year). Dollar-Loonie 1-minute Chart: June 29, 2011
Charts created using Strategy Trader– Prepared by Christopher Vecchio
The Dollar-Loonie pair fell sharply on news that Canadian inflationary prices accelerated at a faster-than-expected pace in March as rising energy costs coupled with a weaker Canadian Dollar over the past two-months has indeed allowed price pressures to creep back in. For the first few months of the year, the stronger Canadian Dollar has insulated the Canadian economy from said prices pressures, with inflation contained at-or-below 3.3 percent from January to April. Canadian Consumer Price Index (YoY): June 2008 to Present
Courtesy: Bloomberg
The rate of inflation was the fastest since March 2003, with prices rising across every category except for shelter. Overall, the consumer price index gained 0.7 percent in May on a monthly basis from 0.3 percent in April, beating the 0.3 percent forecast. Similarly, the year-over-year reading was 3.7 percent, beating April’s and coincidentally the forecast’s figure of 3.3 percent, according to a Bloomberg News survey. The Bank of Canada’s core inflation rates, which are more stable considering they exclude volatile goods, such as energy, still beat expectations, rising 1.8 percent year-over-year in May, beating the 1.5 percent estimate. Still, with gasoline prices rising 29.5 percent, “the largest increase since September 2005,” and generally speaking, prices increasing for staples such as “meat, bread and fresh milk,” it is clear that inflationary pressures are creeping in on the world’s eleventh largest economy, according to Statistics Canada’s report. Overall, the Dow Jones FXCM Dollar Index experienced choppy trading between the Canadian consumer price index report and the Greek parliamentary vote, ranging from as high as 9650.63 to as low as 9614.59 from 11:00 GMT to 13:00 GMT, the approximate time when the final vote tallies were released. At the time this report was written, the index was trading at 9654.88.
Fundamental Headlines
• U.S. Stock-Index Futures Climb on Greece Hopes – Bloomberg • Greeks Protests Turn Violent Ahead of Key Austerity Vote – CNBC • Athens Tops Agenda For Lagarde – Financial Times • Greece Faces “Suicide” Vote on Austerity – Financial Times • Senate Panel Approves Libya Resolution, but Rifts are Exposed – WSJ USDCAD: Following the CPI data, the USD/CAD pair fell by over 40-pips, sending the pair back towards the key .9700 level. Pressure is likely remain now that interest rate hike expectations are likely to rise for the Bank of Canada, which has seen the number of basis points priced into the pair fall in recent weeks. In fact, there is a minute 9.6 percent chance of a 25.0-basis point rate hike at the next central bank meeting, scheduled for July 19. On a similar note, on May 5, 96.0-basis points were priced into the Loonie for the next 12-months, before the Overnight Index Swaps suggested that only 35.0-basis points were priced in as of yesterday. Now, 47.4-basis points are priced into the Canadian Dollar, a level that is only likely to increase over the coming weeks ahead of the rate decision following today’s data. Taking a look at price action, the USD/CAD pair is approaching the 0.9700 exchange rate, a level it hasn’t traded below since June 15. The daily technical strength indicators point towards further losses as well. The RSI continues to fall, at 52 from 60 on Friday, a sign of pair weakness. The MACD Histogram just issued a sell signal, with the pair breaking into a bearish divergence, with the differential widening at -2. Similarly, the Slow Stochastic oscillator recently shifted lower, with the %K trending lower to meet the %D, at 64 and 65 respectively, confirming our downside bias. Yesterday’s range trader detailed a potential USD/CAD pair trade. Written by Christopher Vecchio, Currency Analyst To contact the author of this report, please send inquiries to: cvecchio@dailyfx.com Follow Christopher Vecchio on Twitter: @CVecchioFX
Article source: http://www.dailyfx.com/forex/fundamental/daily_briefing/daily_pieces/top_fx_headlines/2011/06/29/Greek_Government_Passes_Medium-Term_Austerity_Measures.html
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