Greece Appeals for Ability to Bundle Repayments and Defer Until End of the Month
Greece outright rejected proposals from creditors yesterday as negotiations remain at a standstill. The proposals were dubbed "extreme measures” which drew the ire of the Greek finance ministry and Prime Minister Tsipras. The major reforms regarding the pension and labor laws as well as primary account surplus levels demanded by creditors are presently making a solution impossible. The latest can-kicking by the Greek government is increasing the possibility that creditors will be left with nothing if Greece is forced to default and leave the Euro Area. Greece meanwhile has managed to buy more time by applying for an extension and ability to bundle all of the June IMF repayments totaling $1.70 billion. The Euro has rebounded against peers after stumbling following yesterday’s revelations as adding to recent upward momentum.
The United States if forecast to grow less than expected according to the latest forecasts from the International Monetary Fund which are now predicting 2015 growth of 2.50% after previously anticipating 3.10% GDP growth. The revision comes amid warnings about the impact of the stronger dollar as the IMF signals that 2015 is too early for the Federal Reserve to normalize interest rate policies. The IMF is concerned that without inflation and stronger gains in wages, any interest rate hike from the Federal will be detrimental not only to the global economy, but also force the dollar higher which could hinder US growth further. Other warnings on shadow banking dominated the outlook for the bank as it revises world growth lower. The dollar benefited broadly yesterday, with gold prices falling to one-month lows in reflection of weak inflation and a stronger dollar.
Across the Atlantic, the Bank of England opted to leave interest rates unchanged as headwinds from deflation impact the Central Bank’s policy choices. With inflation printing well below the 2% targeted by the Bank of England and no imminent rebound expected, analysts are pushing back the possibility of interest rate hikes until 2016. Raising rates in a deflationary environment would be a major setback for the UK economy which is forecast to experience a slowdown and below average growth for the next 6-18 months. The stronger Pound is also impacting exports although the economy has several bright spots including unemployment printing at a 7-year low and wage growth continuing to outstrip inflation by a wide margin. The Pound has weakened considerably since the announcement from the Central Bank, with the GBPUSD tumbling 120 pips and approaching a major support level.
USDCAD Ascending Triangle Trading Opportunity
The continued improvement in the US dollar has sent the USDCAD pair back towards multi-year highs as optimism regarding higher interest rates increases momentum to the upside. Should today’s unemployment numbers meet or beat estimates, it could pave the way towards another round of substantial gains in the pairs. The ascending triangle pattern has a bullish bias with the USDCAD pair consolidating between resistance sitting at 1.2530 and a near-term uptrend line. Should the pair rise above resistance, this would indicate an upside breakout to be accompanied by renewed volume and momentum. A move below the uptrend line could conversely indicate a possible reversal in prices to the downside and come be the result of an employment number that misses expectations.