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    Geopolitical events will sway the markets

    The mass media is turning its attention from two main geopolitical problems – Greek crisis and nuclear talks with Iran. Nevertheless, I expect that these two topics to jangle the investors’ nerves in the third quarter.

    • Greece has entered into an interim agreement, allowing it to pay back its first debts to the IMF and the ECB. However, there’s still complex round of negotiations on a long-term assistance program ahead, which is expected to take at least four weeks. A significant outvote (229 vs. 64) in favor of the adoption of austerity package, allows us to hope that this agreement will also be accepted. But, nevertheless, the upcoming negotiations are very likely to keep markets at suspense …

    First, we can’t exclude the risk of political crisis in Greece. It is no secret that the ruling coalition came to power on promises to rescue the Greeks from the burden of austerity. Now some of Tsipras’ supporters accuses him of surrendering to creditors. So far, the internal opposition, remains in the minority, but its number may increase if the social protests spread. And if the markets consider the situation to be leading towards collapse of the ruling coalition, early parliamentary elections and the resignation of government, the response of the investment community will be immediate.

    Second, the negotiation process could be delayed due to the disagreement among the “rescuers” themselves. The IMF insists on at least a very deep restructuring (with the extension of the debt payment to 30 years), and considers partial debt relief to be the optimal solution. Germany and some other countries firmly reject the idea of debt write-off. Long negotiations are ahead, so the market still has the “opportunity” to get nervous …

    • Iran also remains on the agenda of financial markets – especially of the energy market. Agreement on the country’s nuclear program has been reached, but the return of the Islamic Republic on the oil market will not happen as fast as previously expected. Analyzing the details of the “deal” I’ve come to realize that Iranian oil is unlikely to reach the world market until the end of the year. Moreover, there are fears that the implementation of the agreement may be violated…
    • On the one hand, there are risks on the part of Iranian authorities. They pledged to demonstrate the country’s nuclear facilities to IAEA inspectors, and the future course of settlement will depend on the results of these inspections.

    On the other, the US republicans, who have the majority in the Congress, are also attempting to undermine the agreement. Barack Obama promised to veto any attempt by Republican opponents to undermine the nuclear deal. Overriding the presidential veto requires a two-thirds vote of approval in each chamber. So the opponents are likely to fail. What they can do – is to attract media’s attention and, as a result oil market participants. So, natural decrease of “black gold” quotes right before Iran returns to the market may be accompanied by short spikes on political news and rumors.

    I think that in the case of both Greece and Iran, the deals will be eventually approved, but the process of their approval can still sway the markets.

     

    Dear traders, please post your comments to our forecasts and share your own opinion. Your ideas can be very helpful for the newcomers in the forex market. Thank you!

    The mass media is turning its attention from two main geopolitical problems – Greek crisis and nuclear talks with Iran. Nevertheless, I expect that these two topics to jangle the investors’ nerves in the third quarter.

    • Greece has entered into an interim agreement, allowing it to pay back its first debts to the IMF and the ECB. However, there’s still complex round of negotiations on a long-term assistance program ahead, which is expected to take at least four weeks. A significant outvote (229 vs. 64) in favor of the adoption of austerity package, allows us to hope that this agreement will also be accepted. But, nevertheless, the upcoming negotiations are very likely to keep markets at suspense …

    First, we can’t exclude the risk of political crisis in Greece. It is no secret that the ruling coalition came to power on promises to rescue the Greeks from the burden of austerity. Now some of Tsipras’ supporters accuses him of surrendering to creditors. So far, the internal opposition, remains in the minority, but its number may increase if the social protests spread. And if the markets consider the situation to be leading towards collapse of the ruling coalition, early parliamentary elections and the resignation of government, the response of the investment community will be immediate.

    Second, the negotiation process could be delayed due to the disagreement among the “rescuers” themselves. The IMF insists on at least a very deep restructuring (with the extension of the debt payment to 30 years), and considers partial debt relief to be the optimal solution. Germany and some other countries firmly reject the idea of debt write-off. Long negotiations are ahead, so the market still has the “opportunity” to get nervous …

    • Iran also remains on the agenda of financial markets – especially of the energy market. Agreement on the country’s nuclear program has been reached, but the return of the Islamic Republic on the oil market will not happen as fast as previously expected. Analyzing the details of the “deal” I’ve come to realize that Iranian oil is unlikely to reach the world market until the end of the year. Moreover, there are fears that the implementation of the agreement may be violated…
    • On the one hand, there are risks on the part of Iranian authorities. They pledged to demonstrate the country’s nuclear facilities to IAEA inspectors, and the future course of settlement will depend on the results of these inspections.

    On the other, the US republicans, who have the majority in the Congress, are also attempting to undermine the agreement. Barack Obama promised to veto any attempt by Republican opponents to undermine the nuclear deal. Overriding the presidential veto requires a two-thirds vote of approval in each chamber. So the opponents are likely to fail. What they can do – is to attract media’s attention and, as a result oil market participants. So, natural decrease of “black gold” quotes right before Iran returns to the market may be accompanied by short spikes on political news and rumors.

    I think that in the case of both Greece and Iran, the deals will be eventually approved, but the process of their approval can still sway the markets.

     

    Dear traders, please post your comments to our forecasts and share your own opinion. Your ideas can be very helpful for the newcomers in the forex market. Thank you!


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