European, S&P 500 Stock Index Futures Point toRisk Aversion US Dollar, Yen Rise Outperform as Asian Stocks Continue to Fall EU’s Juncker Says Progress on Greek Rescue “Extremely Difficult” China Tipped to Make Major Yuan Policy Announcement on Jun 19 Former Fed Chair Greenspan Says Greek Default “Close to Certain” The absence of top-tier data on the European calendar leaves the door open for sentiment trends to remain in control of currency market price action. With that in mind, European stock index futures are pushing aggressively lower ahead of the opening bell while contracts tracking the S&P 500 have erased previous gains and are now in negative territory, hinting the dour mood noted in Asia is due to carry over into the coming session. This promises continued gains for safety-linked currencies at the expense of their sentiment-sensitive counterparts, most notably the commodity dollars but also increasingly the Euro and British Pound, which have rebuilt their correlations to stock markets over recent days. A preliminary reading on US Consumer Confidence from the University of Michigan amounts to the last bit of noteworthy data for the week. The US Dollar and Japanese Yen outperformed overnight as market sentiment soured anew, pushing stocks lower and feeding safe-haven demand for the former currency while encouraging an unwinding of carry trade positions funded in the latter. MSCI Asia Pacific regional stock index fell 0.6 percent as Jean-Claude Juncker – Luxembourg’s Prime Minister and head of the Euro Zone group of finance ministers – said making private investors assume a degree of losses on Greek debt as part of a second round of aid would “risk contagion” and carry “unpredictable consequences”. Most ominously, Juncker said progress on resolving the Greek crisis is “extremely difficult”. His comments appeared in German newspaper Tagesspiegel. Sellers were further encouraged as local Chinese media passed around a story saying Beijing would announce a majorYuan-related policy on June 19. Presumably, the move will amount to an adjustment of the trading band confining the exchange rate. Given policymakers’ lingering concerns about the buoyant inflation rate, it seems reasonable to suspect the adjustment will push the band higher, allowing a stronger currency for the sake of bearing down on price growth. As with other such efforts, the outcome is de-facto negative for economic growth and is likely to prove damaging to risk appetite at large. Meanwhile, former Federal Reserve Chairman Alan Greenspan said there is a high probability of a Greek default – qualifying such an outcome as “close to certain” and likely to happen sooner rather than later – while warning that contagion beyond the Mediterranean country’s borders was a possibility. For their part, the markets are putting the probability of Greek default at 79.7 percent according to what is being priced into credit default swap (CDS) rates.

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