Growth focused assets and riskier currencies are struggling to consolidate as we continue to have Euro-zone angst, which was highlighted by a decision by the ECB to cut off some Greek banks from regular liquidity operations. Since the Greek election, Greeks have withdrawn 1.2 billion euros from Greek banks, around 0.75% of deposits. At the same time, Spain’s PM Rajoy warns that Spain might be shut out of funding markets and there was news that the rescued Spanish bank – Bankia – saw a billion euros worth of deposits withdrawn last week. Overall the European session saw further risk aversion and gains for the USD and JPY.

Traders are on a euro watch this week as political uncertainty is driving financial market tension. Today 5/15, a couple of key events headlines the press. 1) Greek coalition talks break down as President Karolos Papoulias says re-election will be taking place. June 17 is the most likely set date. The uncompromising position of the Syriza party, which is anti-euro and austerity, has been noted to be the reason…

Today’s overnight session was characterized by some tentative risk-on as a result of better than expected Germany 1Q GDP reading, which showed the economy expanding 0.5%, helping the wider Euro-zone skirt a technical recession by posting flat growth in the 1Q. That helped the EUR to stabilize but as NY trading started and with Greece talks on forming a coalition government falter, we had more bearish action and a move in favor of safety.

Q1 GDP results
France: 0.0%, forecast 0.0%, previous 0.1% (revised from 0.2%) – Flat as expected.
Germany: 0.5%, forecast 0.1%, previous -0.2% – Avoided recession
Italy: -0.8%, forecast -0.6%, previous -0.7% – In recession…

In this clip from our Monday Market Intelligence Briefing, we break down the key fundamental factors affecting each currency and what is shaping our fundamental biases. The primary focus of the market this week will be developments in Europe and a possible exit of Greece from the Euro-zone.