Greece Delays Payment To The IMF

 | Jun 05, 2015 04:41AM ET

Market Brief

Greece will not make today’s €300mn payment to the IMF, despite the fact that Alexis Tsipras, Greece’s Prime Minister, announced yesterday morning that its government intended to make the payment. The cash-strapped country requested to make one single payment of €1.5bn at the end of June. In the US, the International Monetary Fund urged the Federal Reserve to delay the first interest rate hike to the first half of 2016 as it cuts US growth forecast for the second time this year. Christine Lagarde, IMF managing director, said: “the inflation rate is not progressing at a rate that would warrant, without risk, a rate hike in the next few months”.

Markets already delayed the beginning of rate tightening from June to September as the US economy suffered a harsh winter and other “temporary factors”. However, despite Janet Yellen’s confidence in the US recovery, it appears that the world’s biggest economy is about to stagnate longer. EUR/USD lost more than 1% from its 3-weeks high of yesterday from 1.1380 to 1.1230 this morning. US May’s NFPs are due this afternoon and median forecast is 226k (223k prior read) while wage growth should increase 0.2%m/m (0.1% prior read). We think EUR/USD will be sensitive to a low read and that it would accelerate the recent euro rally. On the other side, a big figure will be needed to move the dollar higher as recent data were broadly disappointing.

As broadly expected, the Bank of England meeting was a non-event as the rate-setting MPC decided to keep unchanged both its benchmark interest rate at 0.5% and its asset purchase facility at £375bn. GBP/USD moved sideways in the Asian session and is currently trying to break the 1.5338 support level, following lazily EUR/USD’s rise. On the downside, the cable will find support around 1.52 (psychological threshold and Fib 50% on April-May rally) while, on the upside, the sterling will need fresh boost to break the 1.58 area.