Market News & Insights
12 June 2015

Greece Continue to Walk the Tight Rope

EUR/USD 1.1224
GBP/USD 1.5500
GBP/EUR 1.3808 (0.7241)
EUR/CHF 1.0486
GBP/CHF 1.4480
GBP/AUD 2.0152

We finish the week in a similar manner to how we started it, as Greece debt talks continue to take centre stage, while the market are still torn up on whether the Fed will raise rates in the latter stages of the year. All this uncertainty continues to shake up the markets and we are seeing high levels of volatility. Yesterday, European markets climbed in early day trading, with Greek shares in particular rebounding amid renewed hopes for a solution to it debt deal. This hope however was short lived after it was reported that the International Monetary Fund had withdrawn from discussions with Greece citing “no progress” was being made toward an agreement. Despite this unexpected abrupt halt to negotiations, markets reacted fairly calmly. This tranquil mood however could turn quickly to chaos the closer we get to the June 30th deadline.

As reported in yesterday’s commentary, it’s difficult to know what to make of any news coming from these talks. We continue to see the same rhetoric from the Greek camp as they project a sense of optimism that a deal will be reached, however like its creditors I’m far from convinced. With only 18 days to go before the deadline, the major stumbling block of these negotiations continues to be Greece’s unsustainable pension system. Tsipras has continued to say that cuts to pensions are a red line that cannot be crossed, while the IMF argue without such cuts the numbers will not add up. With no sign of a compromise anytime soon, this game of chicken will continue to grab all the headlines, but for now we’ll move on.

Over in the US we saw retail sales for May come in as expected at 1.2%, which was much improved from April’s 0.2%. Yesterday’s reading looks to be a sign that households are finally beginning to put the gains from continued job growth and lower fuel prices to work. The dollar reacted positively to the figure and we saw some further optimism with Initial jobless claims where it continued a recent run of sturdy data coming in slightly above expectation at 279K.

Today in the US, we have core PPI data where markets are expecting an uptick in May of 0.4%. While later in the afternoon we have the University of Michigan confidence survey for June which is also expected to increase this month to 91.4. The recent run of data improvements will make next week’s FOMC meeting that bit more important. If the Fed were thinking of raising rates as early as September then we would expect to see hawkish signals from this meeting to give the market time to adjust, anything short of this then December would look to be the next date on the cards.

Have a great weekend