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Greece optimism fading | US futures tracking rate hike

Investors have scaled back on their buying appetite given that the deadlock remain intact among Greece and its creditors. Botha sides are once again as apart as they can be and the hope of reaching any deal before the 30th of this month has faded once again. So, if the Greek government does not make any payment to the IMF by that date, we have serious trouble in hand and this will rattle the equity market around the globe.

The IMF has given another proposal to Greeks yesterday, but once again, it has touched their sensitive nerve and this is the area, which they do not want to expose to much. What is this area? The pension reforms, although Greece did submit some changes in their proposal this week, but for creditors it wasn’t enough, let alone if that proposal had any chances of passing from the Greek parliament was a complete different question.

We have an issue if Greece does not expose its sensitive nerve on which the creditors wants to operate most of their surgery- the pension reforms and spending cut. Nevertheless, if Greek officials do agree to such a proposal, they will have another hurdle which will be attaining the majority approval in their own parliament and then finally the liquidity tap will be opened by Germany.

The euro meeting is scheduled today, but the hopes are significantly grim of any positive outcome out of this meeting. But, just like a mosquito bite which causes only a small irritation for some, the news out of this meeting will not do much of a favour to the markets and investors will stay on their toes.

Back in the U.S., the same concern has maintained its stamp on the equity market, nonetheless, given that the final Q1 GDP data has painted the picture which pretty much reflects that a rate hike has become a major anxiety for the markets. If you are going to cry about a rate high, you can carry on crying about it, because it is some thing that will take place. The most important aspect is when will this take place, how aggressive will this be and if we are ready for it? The permanent member of the FOMC Jerome Powell, confirmed that two rate hikes will be taking place this year and he is also also speaking today and a similar hawkish message is expected from him.

However, all the decisions by the Fed when it comes to a rate hike are data depended, and this is why traders will be looking very closely towards the PCE inflation and personal spending numbers which are due later this afternoon. The forecast for the inflation number is for 1.2% and for the personal spending is 0.7%. The personal spending optimism is substantially higher as compared to the previous reading of 0.0%. Perhaps improving housing market, unemployment rate and wage growth is behind this idea. At the same time we also have weekly jobless claims data and it is expected to come in at 271K.

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