Spreadex Market Update
Bundestag to vote on Greek deal, Carney signals New Year rate rise
The Finns and the French have already voted the measures through, leaving this morning’s German debate as the final obstacle (at least this week) standing in the way of negotiations for a third bailout fully getting underway. The ‘grand coalition’ at the heart of the Bundestag contains both those who believe this deal is unspeakably harsh, and those, namely aligned with Schauble, who still are hankering for a Grexit. Yet it’s unthinkable that Germany would fail to vote this deal through, especially after the successful votes elsewhere. It will be interesting, however, to see how much rebellion the Chancellor has to deal with.
Elsewhere Christine Lagarde echoed the (increasingly heard, little acted upon) calls for Greek debt relief, whilst the markets are still waiting on confirmation from the Eurogroup of the much-rumoured €7 billion finance bridge, something that is increasingly vital with Monday’s looming €3.5 billion ECB repayment. The unresolved nature of these issues remains a weight on the markets, and saw the DAX and the CAC fail to impress after the bell this Friday morning.
Whilst Greece is still hogging most of the headlines, Mark Carney unleashed his own focus stealing move last night, announcing that the UK should expect an interest rate rise around the New Year. This is not in response to the short-term state of inflation, which remains a way off the 2% target, but instead in response to what the Bank of England sees the ‘gradual firming of underlying inflation pressures’. This was great news for the pound, which hit a 7 and a half year high against the euro whilst seeing a healthy performance against the normally dominant dollar. The FTSE, meanwhile, was less enthused, opening the morning flat as investors wait for more certainty surrounding Greece.
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