US Futures and European markets are trading higher this morning by recovering some of their losses as traders shift their focus towards number of key events which will be taking place today. The losses for the Chinese Yuan continues for the third consecutive day on Wednesday despite intervention by the People Bank of China. The PBOC ordered state owned banks to join them in curbing the sell off in their currency by selling the dollar. One thing that the bank does want to take place is that the Chinese Yuan becomes more weaker than their expectations and therefore, they are willing to take all necessary steps to halt this rapid devaluation of the currency. However, it is still too early to say that traders have backed off from selling the Chinese Yuan and perhaps, the bank may have to show more aggressive determination before they can completely back off.
The next agenda which traders are focused on today is not something new at all, it is about the Greek negotiations about their third bailout package. The Greek government will vote on its 86 billion euro bailout package today and the conditions imposed by the creditors are harsh once again, which the parliament will have to vote on today if they agree to take more pain. However, this time, creditors have given the country a little bit more breathing room and their primary budget surplus target seems to be more realistic. At the same time it gives more hopes for the future debt reliefs.
However, it may be naive to think that if the parliament does vote to support this bailout package, we are out of the woods. The reason is this with recent concerns from the German finance minister about the Greek debt sustainability and with the IMF has a different view, it makes matter a little complicated to put them in front of lawmakers. The probabilities are still high that Greece may have to request another bridge loan as the IMF will not decide on this until Autumn.
On the data front, we have the U.S. retail sales data due later in the day. Given that the employment cost index has printed all time low reading yesterday, a negative reading for this data will further temper the expectations that a rate hike is not going to take place this coming September. The weaker U.S. consumer spending along with fragile Chinese Yuan conditions, the decision process will be a lot tougher for the Fed when it comes to September rate hike. Whether this is an ultimate golden pass for the Fed to use this as an excuse which has been dubbed by many in the market, we are not sure about that. The reason being that the Fed has always telegraphed their opinion very openly and have repeatedly said that their decision is data dependent and equally important is that they can reverse the course of their action after raising the rates if the situation changes dramatically.