Despite the lack of material progress between Greece and its European creditors, the EUR has been rather resilient. Yet, market sentiment towards Greece remains fragile and we continue to expect the EUR to exhibit a high beta to political developments both on the upside but higher so, on the downside. The cash troubles for Greece are likely to remain in the coming weeks and the next official check point includes the payment of €1.8bn in wages and pensions at the end of April and the €200mn IMF interest payment on 1 May. The next scheduled Eurogroup meeting is on 11 May but we do not exclude the possibility of an intra-meeting Eurogroup, if one proves necessary. Greece aside, FX market participants are likely to re-focus on data next week. Barclays Research comments:
- We forecast euro area “flash” HICP inflation (Thursday) to have edged up to 0.0% in April from -0.1% previously and core HICP inflation to have increased to +0.7% from +0.6%, with downside risks attached to our call.”
- “Moreover, we expect German retail sales to moderate further (-0.2% m/m: consensus: 0.4% m/m) and look for a further pick-up in money growth, M3 and a normalization of bank lending flows (Wednesday). Low inflation and subdued inflation expectations are expected to keep the ECB committed to successfully completing its QE program at least until September 2016, adding downward pressure to the EUR, in our view.”
- “We reiterate our conviction in being short EURUSD at current levels.”
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