Another day has passed and we still have no resolution on Greek debt situation and both sides are very cautious and trying to figure out who is going to cough first. Is it really a game of chicken? Analysing this historically, it will become clear that the ECB has ability to bend the hands of its creditors and politicians do not usually hold their same agenda or deliver on their promises which they make during their campaign. President Hollande, back in 2012 swept into the office by saying that he is going to fight German austerity but how far he has gone with that or if he has delivered on that promise, there are many questions on that.
In addition, back in 2010, Ireland was forced to request a loan from the ECB when the bank threaten to cut its Emergency line. So we believe that today’s change in Greek move is very much looking at those actions of the ECB.
Traders are going to be very focused on the economic events which are taking place in the UK. We have the employment data due and the focus will be towards the chatter of hiking the interest rate. Given that the inflation data released yesterday has moved the interest rate expectations envelope towards the early next year but we think, the MPC members will still wait for the wage growth to pick up before they are certain to raise the interest rate