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Back to square one for Greece?

Today has been a remarkably calm day in the markets, ahead of a potentially explosive event this evening as the Greek parliament decides whether to accept the bailout agreement.

The City of London skyline
Source: Bloomberg

UK jobs data pointed to a shift away from the positive trend that has dominated recent months. The spike in unemployment to 5.6% certainly took the headlines, yet it was the shift in claimants that is worrying, showing the first monthly rise since Q4 2012. Coming a day after Mark Carney warned that a rate rise is just around the corner, today's jobs report, coupled with yesterday's stagnant CPI number, proves that expectations should remain for a Q1 2016 rate rise.

In the US, Federal Reserve chair Janet Yellen's testimony looked remarkably like every other statement she has put out over recent months, insisting that a 2015 rate hike remained on the cards and would be decided upon on a meeting-by-meeting basis. Granted, US employment has been relatively strong over recent months, following a chilly first quarter. A September rate hike remains a possibility, but history dictates that the Fed will more likely than not find another reason to hold off.

Tonight's Greek parliamentary vote remains the biggest event risk for financial markets, with the very real possibility that the resolution found between creditors and Syriza could be all for nothing if it fails to find approval with politicians in Athens. The Greek crisis is certainly not over yet. We’re only at the start of several national votes which potentially could derail the bailout. Beyond this, the IMF's criticism of the plan highlights the concern that, without any form of guarantee of debt sustainability, the deal would just be a sticking plaster on a debt wound that would continue to grow. Unfortunately the deal hammered out at the start of this week represents a capitulation for Greece; a decision taken to simply escape the pressure of the negotiations merry-go-round, rather than the Greek long-term debt spiral.

The BoC's decision to cut its overnight rate by 25 basis points has further compounded the overwhelming deterioration seen in the Canadian dollar over recent weeks. A weakening economic outlook, fuelled by falling crude prices, means that something had to be done, and despite the threat that it would further inflate an already bubbly housing market, the decision to act now rather than later seems justified.

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