Spreadex Market Update
German ‘yes’ vote doesn’t look in doubt, but debt relief issue remains tricky
Both Chancellor and finance minister spoke before the German parliament this morning, with Merkel stating that a temporary Grexit was not an option due to opposition from seemingly everyone that wasn’t Germany, whilst claiming that by agreeing a deal the Eurozone has avoided a ‘predictable chaos’. Schauble, meanwhile, said this is the last chance to deal with the ‘difficult task’ of Greece, giving an impassioned speech that urged the Bundestag to give Berlin the mandate to start bailout negotiations, striking a tone that was at odds with his normally bearish (and some would say Grexit-seeking) attitude towards Greece.
Debt relief of course got a mention, with Merkel reaffirming that a debt haircut isn’t possible within the Eurozone; Schauble went one further, portraying the potential third bailout as caught between the absolute need for debt relief, and the illegality of a haircut under the Eurozone’s laws. The Eurozone indices looked a bit pallid as the debate raged on, with the DAX especially slipping to some mild losses; this is unlikely to change until the results of the German vote are announced and/or the Eurogroup reveals a Greek finance bridge.
Following 2 days of hawkish (but perhaps not hawkish enough) comments from Janet Yellen, one of the Federal Reserve’s key metrics for an interest rate rise will get a work out this afternoon, as the latest US inflation figures are announced. The figure is expected to slip from 0.4% to 0.3% month-on-month, whilst core CPI is expected to see a slight jump to 0.2% from 0.1%. Not exactly the kind of progress the Fed wants to see if it is going to raise rates this year. The preliminary UoM consumer sentiment figure will also be of note, especially since retail sales took a dramatic tumble earlier in the week.
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