17 July, AtoZForex, Lagos – After the Greek parliament voted in support of austerity measures, the Eurogroup released a statement, some excerpts: “The Eurogroup welcomes the adoption by the Greek Parliament of all the commitments specified in the Euro Summit statement of 12 July. On the basis of a positive assessment by the institutions, which concluded that the authorities have implemented the first set of four measures in a timely and overall satisfactory manner and which confirmed that the Euro Summit statement has been included in the preamble to the implementing law adopted by the Greek parliament, we reached today a decision to grant in principle a 3-year ESM stability support to Greece, subject to the completion of relevant national procedures.”
ECB Supports Greece Debt Relief
As expected, the ECB maintained its minimum bid rate at record lows of 0.05%. The ECB conference which followed had its major emphasis on Greece. President Draghi assured that the risk of a Greece default on the July 20 debt repayment to the ECB has now been averted. The amount totals €4.2 billion of bonds. Unlike his German counterpart’s view, Mr. Draghia agreed that Greece should get a debt relief, saying that the need was “uncontroversial”. This adds to growing support from the IMF for a relief for Greece, therefore putting the other the possible ways and means should be discussed in “coming weeks. In response to criticism that the ECB did wrong by freezing its ELA to Athens, Mr. Draghi said those claims were “unwarranted” and “unfounded,” pointing to he the huge amount already committed to Greek banks since early 2015. Speaking of the broader economy, he pointed that performing much as before, that is recovery is “broadening” if still less than satisfactory. He said that “confirms the need to maintain a steady monetary policy course, firmly implementing the Governing Council’s monetary policy decisions.” The Euro strengthened slightly, but still ended the day lower in continuation of the trend, as the bloc currency has been on the fall for the past few days.
US Unemployment claims drop
The US unemployment claims dropped for the first time in four weeks, coming at 281k as the employment sector completes its recovery. This is inline with the Fed’s desire to see further signs of firming employment and robust demand as they consider the commencement of the first rate hikes in nine years. Even with unemployment rate is at a seven-year low and fewer employed part-time who want full-time work, Fed Chair Janet Yellen pointed this week that “there is still some slack” in the job market. An important point noted from Fed Chair Yellen’s Semiannual Monetary Policy Report to the Congress “inflation continues to run below the Committee’s 2 percent objective, with the personal consumption expenditures (PCE) price index up only 1/4 percent over the 12 months ending in May and the core index, which excludes the volatile food and energy components, up only 1-1/4 percent over the same period.” The dollar continues to strengthen as markets anticipate the commencement of rate hikes to come latter in the year, with higher expectations for September.
Today, we have:
- 12:30 P.M GMT- Core CPI m/m and CPI m/m. These will be closely watched, following the Bank of Canada’s decision to lower its overnight rate target yesterday as the oils shock hit the country, almost sending it into a recession. The overnight rate was dropped from 0.75% to 0.50%., the first cut for the year.
- 12:30 P.M GMT- From the US, we also have the Core CPI m/m and CPI m/m scheduled for release, as well as Building Permits and the Prelim UoM Consumer Sentiment. The dollar looks set to end the week strong having spent the most part of the week in an upward trend.