With progress being made in discussions over the financing of a €7 billion Greek bridging loan, Chinese Shenzhen markets rallying into the close of the week, both the BoE and FOMC feeling confident enough to predict interest rate rises sooner than markets have been calculating – what could possibly go wrong?
For a start, the German parliament is yet to ratify the outline basis for the Greek bailout deal. Judging by the comments from German finance minister Wolfgang Schauble prior to today, we can expect some choice phraseology in what will no doubt be a lively debate. Trading floor banter has suggested that the Bundestag might all have chipped in to get Angela Merkel her own little Greek island for her birthday today.
I’m not sure, but I have a sneaky suspicion that Federal Reserve chair Janet Yellen and BoE governor Mark Carney have a little side bet to see which of them can raise interest rates first. Prior to last night’s speech, currency markets had been factoring in that the BoE would not be raising interest rates until February at the earliest. The markets have brought forward their own timeline, but they’re obviously still somewhat sceptical that the turn of the year is a realistic call.
Greek businesses are already implementing the newly increased tax rates, and expectation is high that the current capital controls being imposed on the Greek populous could at least be partially lifted. Should this prove to be the case we might expect to get further clarity over the weekend, once again making IG's weekend market essential watching ahead of what could well be a lively Monday for the European banking sector.