Daily FX Update, 12 May 2015 OVERNIGHT MARKET UPDATE:

·         San Francisco Fed President Williams (2015 voter) said, that he expected growth to bounce back in Q2, that the US is seeing pretty steady jobs gains and that every meeting is on the table.   

·         The focus in European FX was on Greece’s deteriorating liquidity position as reports indicated that the EUR750 million repayment to the IMF has been executed, but there is precious little money now remaining. The ongoing saga of the Greek government drawing a line in the sand over pension cuts and collective wage bargaining added to tension ahead of Monday’s euro group meeting. Nevertheless, early reports from the meeting suggested that the euro area’s finance ministers welcome the progress that Greece is making towards receiving aid, but that more work needs to be done. One possible solution proposed recently is for a possible referendum in Greece on euro membership as a way to address domestic political difficulties. 75-80% of the Greek population say they are in favour of staying in the euro. If Greece opted to stay in, it must comply with its commitments. Otherwise, a no vote on euro membership could hasten the country’s exit.

·         In the currency market, the NZD remained under pressure with potential for RBNZ policy action the driver. Post-election strength for GBP shrugged off EU referendum risks. EUR was stable – thanks to reports of some Greek progress.   

·         The market appearing to take a more upbeat interpretation of the US April NFP release saw the yield on the US 10-year note rise 13 bps to 2.28%.      

·         US equity markets came under increasing pressure as fixed income markets declined (yields rose). The Dow Jones and S&P 500 were both 0.47% and 0.51% lower.                 

·         Crude oil prices were modestly weaker. Traders and investors are increasingly cautious on adding to oil positions given the price gains in recent months. Higher prices are also increasing the possibility of producers reversing recent production cuts.   

Gold prices declined for the third time in four sessions as signs of easing tensions between Greece and its creditors reduced demand for the metal as a haven.