USD: Little follow through from initial USD strengthening in the wake of weekend Greece developments. This could denote light conviction across market or it is possible that it signals expectation for limited lasting fallout from Greece. We suspect the former is closer to the truth, so we scope for USD to benefit from renewed contraction in risk appetite in days ahead. If ripples from Greece continue to be light, focus may shift to ISM and payrolls at the end of the week.
EUR: Signs of contagion are thus far limited, so it is possible that investors are discounting a benign outcome. However, we are skeptical that the price action signals a sustained improvement in sentiment and we would look for EUR-crosses to trade lower. Immediate focus will now be on response to (expected) failed payment to IMF.
GBP: Long positions on the crosses still attractive given that Greek saga will have only limited direct pass through to UK policy. Speeches by Weale and Haldane likely to denote attentiveness to Europe if they touch on ongoing developments, with hawkish risks upon downplaying of pass through to UK.
JPY: Fading jump in EURJPY should be attractive to position for renewed deterioration in sentiment. Tankan due tomorrow, with investors looking for flat at 12 on headline large manufacturers. Strength would extend recent string of somewhat stronger data flow and imply continued reduction in risk for additional BoJ easing.
CAD: CAD little moved by weekend developments, but this may belie vulnerability to rising volatility given potential for reversal of recent hedge fund buying.
AUD: AUD seeing leveraged buying, so risk that investors caught off-guard by dovish Stevens today, likely greater. Given continued vulnerability to Europe driven deterioration in sentiment and higher volatility, we favor AUD shorts.
NZD: Light positioning in NZD may see some outperformance vs. commodity currency peers amid higher volatility.
NOK and SEK: Scandies vulnerable to Greece developments given high beta to Europe. Norway retail sales widely missed the expectation, dragging NOK lower together with lower oil. European developments may prove more important for direction. Riksbank the next main focus for Scandies.
CHF: CHF likely to see buying on Europe developments, however SNB intervention may be a limiting force for appreciation. This could see CHF underperformance vs. GBP. Weakness in EURCHF could likewise stoke
expectation for Swiss rate cuts.