From The Floor: Greece Enters The Comedy Zone

No heckling please

Greece has entered "comedy-hour mode" again with a demand that Germany pay WW2 reparations, says Saxo Bank's head of forex strategy John J Hardy.

Prime minister Alexis Tsipris flies to Moscow today for high-level talks with the Kremlin amid speculation that Russia might ride to the ailing state's rescue and ensuring yet more headline-grabbing for Europe's prodigal child.

"There is definitely more risk on that front with the April 24 date looming," says Hardy.

Bonds watch

And Greece's ongoing battle with Germany casts a shadow across the bonds market despite bunds trading higher "to test 159 levels," says Michael Boye from the Copenhagen Fixed Income desk.

It's a mixed picture in bonds, says Boye, after 10-Year Treasury yields dropped to 1.82% following last week's disappointing nonfarm payrolls figure.

Europe's performance was, however, boosted by the European Central Bank after it said that it had met its targets for March of EUR60 billion buying through its quantitative easing programme.

Japan's test

In Asia, meanwhile, JPY enjoyed a sharp rally against the dollar after the Bank of Japan affirmed it was holding true to its massive yen 80 trillion injection programme. USD/JPY immediately slipped 25 pips to 119.95, says Singapore's Christoffe Moltke-Leth, before slipping further through the session to 119.70.

USD/JPY was at 119.90 at 0655 GMT.

"For this rally to continue, we probably need some risk-off sentiment," says Hardy. "Inflation is definitely heading towards deflation," bringing into some doubt the government's strategy that began nearly a year ago with the sales tax changes.

Just a minute

For the dollar's somewhat wavering form of the last few days, meanwhile, today's Federal Open Market Committee minutes from the last meeting might offer some hope, but Hardy says dovishness has been largely priced in.

For EUR/USD, the minutes could provide the spark that determines the pair's direction depending on a finish above or below the 1.0900-25 zone. "The market is pricing in dovish expectations already," says Hardy, " so surprises could be to the upside for the dollar."

A release that is very dovish, however, could see EUR/USD head towards 1.10, he says.

Watch out

The reverberations from Friday's poor NFP report may also spill over into US Q1 earnings season, which kicks off with Alcoa (NYSE:AA) tonight. Don't get too bullish — there may be "more negative surprises," warns Saxo Bank's head of equities strategy Peter Garnry.

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"Oil prices are down 50%, which has hit the energy sector and that makes up 10% of the S&P 500," he says. "With the stronger dollar over 2015, there is a degree of negativity that analysts are not factoring in."

"Analysts can sometimes get behind the curve on these developments and I think they are being too optimistic," he says.

Garnry suggests a hedge against the earnings opting for a 15 May P2075 Put which sells at $37.60. "It looks cheap given earnings and extended valuations," he says, adding, "I think you should still be net long overall but it is also smart to be quite prudent at these levels."

And finally...

You might scoff at a punt on Brazilian oil giant Petrobras, but Boye reckons the long-awaited publication of its results next week, could see a sudden return to form for "the fallen angel" as "so much negativity has already been priced in."

With negative outlooks from the likes of Moody's and Fitch and an oil price that is in historical terms, stuck in the doldrums, it's certainly contrarian, but Boye sees promise if the audits and revised accounts provide the market with the clarification it needs.

Written By: Saxo Bank