Greece Coming Down To The Wire
Jeremy Cook | Jun 25, 2015 05:16AM ET
No news is bad news
Coming back from a week’s holiday on the continent I landed at Gatwick yesterday praying that the Greek situation had been squarely dealt with and I could return to my desk and not have to mention Greece. Unfortunately that is not the case.
June 30th remains a hard deadline for the end of the current Greek bailout program having been extended from February. As it stands at the moment, achieving a deal before this deadline remains unlikely with Finance Ministers saying that more time is needed. As we have frequently said in the past, the negotiations around Greece are very similar to a game of basketball; back and forth for an interminable period before the last three or so minutes when one team manages to secure the win. We are getting closer to that three minutes of madness but for today at least we have to expect the back and forth to continue.
Of course, a deal does not mean that Greece will be totally off the markets’ radar. If we do not see a dramatic restructuring of the outstanding debts then we will be back in the same place before you can say ‘Varoufakis’. That could easily come before the end of the year.
In any case, hope springs eternal and the euro is higher this morning despite the fact that we have five days until the Greek banking system is no longer subject to the protections afforded by the European Central Bank.
Dollar still looks oversold
Yesterday’s US GDP numbers hardly made a dent in these markets, such is the focus on Greece. Following last week’s Fed meeting, the USD has recovered somewhat but remains cast in a dovish light by those Fed member comments. Today’s PCE inflation numbers certainly have the power to drive further dollar strength if price pressures are seen to be building. The Fed has continued its stance of ‘data dependency’ and a stronger inflation environment is going to do a lot for the dollar as it emerges.
Pound remains proud
Sterling looks happy at these elevated levels following its outperformance last week on the latest jobs report. There is little out for sterling through the rest of this week and I think the pound will take its cues from the wider risk environment.
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