Forex - Greek Auction Finds Luke Warm Reception

Risk sentiment continues to firm, following the Euro zone / IMF agreement to bailout, if necessary, an ailing Greece. However, the lack of collateral exuberance in FX markets has us hesitant in climbing aboard the EUR rally bandwagon just yet. Greece's test of the capital markets appetite with yesterday's 7yr benchmark bond issue went relatively smoothly. Although yield remained elevated (325bps higher than the German equal), bid-to-cover ratio was lower than before, at just under 1.5 and saw many less bidders; Greece did obtain their funding requirements through April, clearly easing shortfall worries. While the less than triumphant auction slightly disappointed some, there wasn't a massive sell off in the EURUSD, which was a minor victory. While the EURUSD has gained a bullish tone, failure to test the 1.3585 resistance means the bears are still in control and we expect the downside will come into play. Crude prices rallied yesterday with wti front end climbing up to $82.74bll. While, in general, commodity currencies should benefit for a varieties of reasons, we are seeing the highest direct correlation with CAD and NOK. BoC Senior Deputy Governor Jenkins sounded less protective of the loonie, stating the CAD was influenced by many factors and that exporters have had to adapt to a stronger currency. In New Zealand, building permits climbed 5.9% m/m vs. 2.0% exp, prev. -2.8%. While this is clearly a fringe figure, it does marginally increase the probability that the RBNZ will begin hiking rates in June. With the economic data in the commodity bloc showing good sustained growth, central banks preparing for further or stating tightening and commodity prices expected to stay strong, we believe that these currencies will continue to outperform their G10 peers. Perhaps the biggest risk to this forecast is China path from a monetary policy and US trade relations standpoint. It's a relatively quiet day. The US March Conference Board index of consumer confidence should rebound, as Michigan indices supported the unexpected drop recorded last month.