The persistent sell-off in bond markets has left global markets with little assurance, one day before the next Greek debt deadline, US May non-farm payrolls and an extremely important OPEC meeting. Following the non-event that was yesterday’s European Central Bank meeting, the euro continues its surge this morning despite no final agreement between Greece and its many creditors. Although ECB Chairman Mario Draghi did not make any comments towards Greece, the euro did find support as the ECB raised inflation targets into 2016 and touted its QE program. Greek PM Alexis Tsipras left talks with senior EU officials on Wednesday saying a deal was within sight and although some agreements have been made, there remains work to be done. German 10-year Bund yields rose to new 2015 highs putting five month highs to test for the euro. As global equities remain a sea of red amid this uncertainty, safe haven assets such as gold and the Swiss franc pace markets with the dollar losing favor with investors around the world.
The euro remains the currency du jour, as German bund yields keep a bid tone filtering through the foreign exchange market. Although there were very little expectations for yesterday’s ECB meeting, Chairman Draghi did get things moving as the central bank forecasts faster inflation in 2016 and 2017. Despite much uncertainty hanging over the Greek negotiations, at the end of the day it would be quite a surprise if European leaders did not strike an accord, with more than €1.5 billion to be paid back to creditors in June. Both sides are working toward a new “final deadline” of June 14th to bring some kind of calm to markets. Despite Mr. Draghi’s assurance that volatility is here to stay, judgment should be held after this week’s many key events, meetings and deadlines.
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