Markets Look For More Solid Footing, But Need To Get Passed US Jobs Data

NATO meets today, and two European issues are center stage. The first is the dispute between Greece and Turkey over what appears to be large gas finds in waters that Ankara claims. The two NATO members remain at loggerheads. Greece is a member of the EU and is supported by Brussels. The second issue is the Navalny poisoning. Some formal response is necessary, though unlike the past victims of Moscow's actions, this one apparently took place on Russian territory, a technical distinction of diplomatic importance. The critics of the Nord Stream II gas pipeline that is to bypass Ukraine and go directly to Germany is pushing Berlin to cancel it.  The US has been pressing for this for some time and has threatened sanctions on those that persist.  Although some German MPS form across the political spectrum are ready to abandon the commercial project, it is not clear that there is a consensus to do so in the grand coalition. Some note that the US imports Russian oil while being critical of Europe's gas imports, which strikes some as a commercial position for the US, not one of principle.  Europe could pass its own version of the Magnitsky Act that would allow sanctions for human rights violations.  

The euro recovered smartly yesterday, making new highs late in the North American session, even as equities were hammered. The euro edged above yesterdays highs to about $1.1865 by early in the European session. The market seems reluctant to do much until at least after the US jobs data.  Two option strikes are relevant:  The first is for about 650 mln euros at $1.1850, and the other is for about 965 mln euros at $1.1875. Note that there are nearly $3 bln in options that will be cut today struck between $1.1900 and $1.1905. There are also roughly $3 bln in options in the $1.1780-$1.1800 range. Given that long holiday weekend in the US, it would not be surprising if the market faded the initial reaction to the employment data. Sterling is trading at the lower end of yesterday's range. It is in a little more than half a cent range above $1.3255. It met a wall of selling in near $1.3320. Sterling closed near $1.3350 last week, and there is a GBP270 mln option struck there that expires today. Its three-week advance, which matches the longest since January it at risk.  

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Read more by Marc on his site Marc to Market.

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