Markets little changed in a quite Wednesday trade

Wednesday, May 27 2015

There are no major data releases today, so traders are being focused more on global concerns. RBA Assistant Governor Lowe said this morning that rising property prices, household debt and unemployment have increased the risks in bank mortgage books. He dismissed suggestions that lending limits imposed on the banks were put in place to let the RBA cut interest rates further. He said they were designed “to make sure the banking system is adequately dealing with a rising risk in mortgage loan portfolios.My subjective assessment would be the level of risk in bank mortgage portfolios has risen over the past couple of years,” Lowe told a Thomson Reuters conference in Sydney during a Q&A session.

Focus of Eurozone is still Greek debt crisis. There are reports that Greece is likely to miss May deal deadline as talks stall and agreement with creditors is nowhere close. It’s just over a week until Greece hits the hard deadline of fact: it cannot pay the €300m it owes the IMF on 5 June, and must do a deal before then, or signal a default that would immediately draw down the wrath of the ECB onto its stricken banks. Any scenario is likely to add volatility to the markets.

As for UK, main topic these days is so called Brexit. There are plenty of scare stories out there about what might happen to the U.K. economy if the country votes to leave the European Union in the upcoming referendum like a collapse in trade, millions thrown out of work, Sterling tumbling on the markets, and the government phoning up the IMF to ask for an emergency bailout. However, in reality, investors should ignore the hype. A so-called Brexit won’t actually make much difference to the economy one way or another.

There will be no major data releases in the rest of the session. We expect USD to edge higher in the US part of the session. Euro is currently being traded around 1.0880 area, Sterling is few points above 1.5380 level, while Aussie is slightly above 0.77 handle.

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