An emailed statement from the Greek Prime Minister's office announced that the government has reached agreement on austerity measures that are a prerequisite for a EUR 130 billion financing package which is vital for Greece to make a EUR 14.5 billion bond pay-ment due on March 20. Budget cuts will be increase by another 1.5% of GDP and include measures such as a 20% reduction in the mini-mum wage, lower pension payments and job cuts of 15,000 public sector employees. Meanwhile, in Paris, Greek bondholders continued their seemingly never-ending discussions of the terms of a debt swap which will see them take haircuts of about 70%. The Euro reached a two month high against the USD to trade at 1.3322.

Despite the breakthrough in Greece, European finance ministers have delayed the ratification of the Greek rescue package as they push Athens to immediately implement the newly agreed austerity package. EU Commissioner Olli Rehn has said at an emergency meeting of finance ministers in Brussels that the Greek government must legislate and act to convince other members of the eurozone that the se-cond aid package can be made to work. The situation in Greece is far from resolved and we expect to see rising social unrest in the na-tion as protests escalate to a flashpoint over the latest austerity measures. Normally important news barely registered. The ECB kept rates on hold at 1.00% while the Bank of England held rates at 0.5% and expanded it asset purchase program by GBP 50 billion to GBP 325 billion. The Australian dollar continues to hold firm around 1.0780.

Equity markets continue their impressive run with the S&P 500 rising to a 7 month high as Greek leaders agreed on an austerity package which is vital for the approval of the second rescue package. The index has closed 0.15% higher at 1,351.00. We are now in an official global equity bull market as the MSCI All-Country World Index of 45 countries rose today to a level 20% higher than its lows in October 2011. The index has gained almost 8% this year alone. In Europe, investors were also buoyed by the developments in Greece and the DAX gained 0.59% to 6,789 while the FTSE rose 0.33% to 5,895.

Commodity prices firmed with the CRB index gaining 0.73 points to 315.50. WTI crude rose for the third day by 1.15% to $99.85 as first time unemployment claims fell in the US. Precious metals consolidated within recent ranges with gold steady at $1,730 while silver gained by 0.42% to $33.85. Soft commodities were mixed with wheat plunging more than 2% while copper has gained 1.6%. Today, look for the release of the high impact Chinese trade data

GOLD continues to trade within its recent ranges seemingly undisturbed by developments out of Europe. It traded in a range of $1,726 to $1,752 overnight to open this morning at $1,729 barely changed from yesterday Support at $1,720 held well while strong resistance at $1,750 continues to hold. We had expected a subdued price action in gold this week and expect that this will be the order of the day in Asian trade today, It appears to me that steady rise in equity markets over the start of this year has deflected investor focus away from gold. Gold will be back in the limelight even if the next finance package for Greece is approved as we believe that the implementation of the finance package will be near impossible. Today's Chinese trade data may shock the markets but the reaction of investors will be difficult to gauge. Yesterday's Chinese CPI was higher than expected and somewhat at odds with reports of slowly retail sales during the L:unar New Year period. Sell rallies towards $1,750

Compass Direction

• Short-Term: NEUTRAL
• Medium-Term: BULLISH

Compass Global Markets Pty Ltd

FX research by Keagan York
Commodities research by Peter Turville-Ince

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