What is the endgame for Greece?

•     What is the endgame for Greece?

–    The government is trying to fan fears that if it defaults, the Eurozone might collapse. They reason that the EU will bail them out rather than risk Armageddon

–    However, the country can’t default, because its budget would still be in deficit even if it didn’t have any debt. So if they default, they will suffer even worse austerity

–    The EU knows this and is trying to starve them of money till they capitulate

–    I expect the government will eventually realize its position is hopeless and give in, perhaps after holding a referendum to get approval for reneging on campaign promises

•     RBA minutes show “soft” easing bias

–    Easing bias was removed on purpose, but they still have scope to ease further

–    AUD weakens sharply on report but bounces back; I remain bearish

•     NZ inflation expectations rise slightly in Q2

–    Gov. Wheeler said he will cut rates if near-zero inflation starts to weigh on outlook, but apparently that’s not the case; NZD strengthens. I prefer NZD over AUD

•     Today:

–    Eurozone: German ZEW survey expected to be lower = EUR-negative

–    UK:  CPI for April expected to remain at 0% yoy, GBP-neutral

–    US: Housing starts & building permits for April expected to increase modestly, could be USD-positive.

–    Speakers:  Riksbank Gov. Ingves, Bank of Canada Gov. Poloz