Markets Await Greek Parliament Vote and ECB Press Conference
The European Central Bank (ECB) will announce its minimum bid rate on Thursday at 7:45 am EDT and will be followed by ECB President Mario Draghi press conference at 8:30 am EDT. Members of the financial press are expected to question Mr. Draghi about the impact of the Greek debt deal on the European economy hours after the parliament results vote in Greece. The outcome of the vote is still unclear as opinions are divided. It appears that creditor demands will be passed into law due to the pressure imposed by lack of liquidity of Greek banks but there is little certainty when it comes to Greece.
U.S. Federal Reserve Chair Janet Yellen in her testimony before Congress did not deviate from previous remarks and repeated the central bank’s positive forecast on the economy. A second half recovery means a benchmark interest rate hike is still on the schedule for 2015. Yellen will appear before the U.S. senate on Thursday at 10:00 am EDT.
The USD found support in the Fed’s Chair comments on the encouraging sings of economic improvement. The EUR/USD depreciated 0.52% in the past 24 hours after a better than expected producer’s price index and the Fed’s comments and putting some distance from the disappointment of the retail sales numbers published yesterday. There were no major releases in Europe with all the focus set on the Greek parliament’s vote ahead of the ECB press conference tomorrow.
The last five months have been hard on the Greece. After electing a new government who won on an anti-austerity campaign. The world was introduced to the political tag team of Prime Minister Alexis Tsipras and Finance Minister Yanis Varoufakis. Together they managed to turn the tables on the negotiating teams from the Eurozone and the International Monetary Fund (IMF). Bridges were burnt and the clock inevitable started counting down to the wire.
Varoufakis was no longer the lead of the negotiating team after his brazen style was hurting the chances of a deal. After almost reaching an agreement Tsipras turned around and put it to a referendum with a heavy bias for the people to vote “No”, And categorically they did, the “No” vote won by over 60% of the vote. Reality was not far behind and by rejecting the final deal, which by all terms had already expired, Greek faced default.
Now the Syriza led government must make a hard choice. The people’s representatives must disregard the people’s vote to avoid a Grexit. This capitulation could result in triggering a snap election which will make Tsipras rule a memorable but short one as the opposition could reclaim the leadership of the nation. If the parliaments votes the proposed reforms into law the ECB can release emergency funds as well as lines of credit to keep Greek banks afloat.
Markets are jittery awaiting the outcome of this week as there have been several moments when it seemed the end of negotiations was near only to end in failure.
Economic events to watch tomorrow:
Thursday, July 16
7:45am EUR Minimum Bid Rate
8:30am EUR ECB Press Conference
8:30am USD US Unemployment Claims
10:00am USD Fed Chair Yellen Testifies before US Senate
USD Philly Fed Manufacturing Index
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