Article Highlights

  • Japan’s Economy Watchers sentiment index fell from 53.3 to 51.0
  • Chinese equities resume slide today
  • China Securities Regulatory Commission: Panic in stock market strains liquidity
  • Greece to make request for medium-term ESM loan today
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Risk aversion extended its stay in the financial markets, thanks to worsening concerns about China’s stock market slump and a potential Grexit. According to the China Securities Regulatory Commission, there are signs of panic in the market and that this is straining liquidity. Looks like the stimulus efforts from the Chinese government and the PBoC aren’t working their magic!

This downturn has dampened overall market sentiment, leading to a decline among higher-yielding currencies. AUD/USD broke below the .7400 handle and is down 63 pips (-0.85%), NZD/USD is lower by 11 pips (-0.15%), AUD/JPY is down 118 pips (-1.31%), and NZD/JPY is lower by 57 pips (-0.70%).

Even the Japanese equity market wasn’t immune from the tumble in Chinese shares, as the Nikkei chalked up a 3.14% loss for the day. It didn’t help that Japan’s Economy Watchers sentiment index fell from 53.3 to 51.0 instead of just dipping to the projected 53.2 figure.

This gloomy mood in the forex market was probably spurred by traders starting to accept the looming possibility of a Grexit sooner or later. Greek government officials were unable to submit a revised version of their economic reforms, the crowdfunding efforts churned out only 1.9 million EUR, and it looks like I’m not getting the Alex Tsipras postcard I wanted!

Greece is set to make a conference call to formally request a medium-term loan from the European Stability Mechanism (ESM) today, but the release of the funds could still hinge on whether on not the Greeks are able to submit a feasible set of proposals. If not, they still have until Sunday to decide if they can shape up or ship out.

When it comes to economic releases, only the U.K. Halifax HPI and government annual budget figures are due today. This might not have such a huge impact on pound price action, as European currencies all seem to be feeling the pain from Greece. Then again, watch out for any potential surprises in the next few hours!

U.S. Session Recap

Bonnie and Clyde, peanut butter and jelly, Justin Bieber and his hair. Some things just go well together.

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