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Greek Plan a “Trojan Horse”

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Berlin rejects the Greek formal request for a six month extension to its current loan agreement, calling it cash without reform. In a statement, German FM spokesman Martin Jaeger stated that a proposal from Greece's government "is not a substantial proposal for a solution" and suggested amounts to a plan "for bridge financing without fulfilling the demands of the (bailout) program. In response, the Greek government official said the Thursday request was only made to provide a safety net for the under siege banking system. And this way why the requested failed to extend controversial spending cuts, tax increases and other reforms that were conditions of the bailout program. The Eurogroup is meeting today yet expecations for a Greek deal is extremely low. This suggests the drama will drag into next week. Despite the risk increase of Greece leaving the EU, financial markets remain stable in thin trading. The holidays help back participation in Asia equity markets. The Nikkei gapped on the open then quickly rose to 18,297.92 new 15-years high, while the Sensex fell -0.75 and ASX rose 0.45. In FX markets traders were in a hold pattern waiting for developments from EU – Greek situation. USDJPY was slightly weaker trading between 118.85 to 119.10, support being provide by the bullish equity sentiment. EURUSD held in a tight range after consolidating recent loses. EURUSD traded between 1.1357 to 1.1375. AUDUSD grinded higher from 0.7789 to 0.7810 while AUUD/NZD consolidated between 1.0360 and 1.0370 after bouncing off new lows at 1.0299 yesterday.

Outside the fluid EU – Greek situation traders will be watching Euro Area Flash PMIs. Markets expected Euro area flash composite PMI to improve to 53 from 52.6, manufacturing PMI to improve to 51.5 from 51.0 and service PMI 53.0 from 52.7. German PMI should also be positive. The topline manufacturing is expected to rise to 51.5, and services PMI to 54.4. EURUSD pricing will be subject to new flow from negotiations between Greek government and the Eurogroup. Spikes higher could be a good time to reload on shorts in anticipation of the start of the ECB QE program and repricing of the not so dovish FOMC meeting minutes.

In the UK retail sales x-auto is likely to increase 0.3mm after rising 0.2 in December. We continue to be constructive on GBP against the EUR, as yield seeker favor UK debt.

France: On the French government’s attempt to revive “la loi Macron” and extend retail opening times to Sunday, Luc Luyet, CIIA – Senior Market Analyst said: “The difficulty to pass the “Macron law”, a growth and activity law, by the French government is a sad reminder that any future bold structural reforms remain unlikely. Indeed, the unity within the left majority has been deeply shattered while there is still a lack of unity within the right wing. As a result, finding a strong majority to pass any ambitious bill through the Parliament will likely be extremely difficult.”

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