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IronFX Daily Commentary | 19/06/15

•Emergency EU summit called after no deal at Eurogroup Eurozone leaders will hold an emergency summit on Monday to try to seal a deal on the Greek crisis. Following the failure of Eurogroup to bridge the gap between Greece and its creditors, the talks will now move to the highest political level where the Greek PM has perceived that he has the strongest influence there. Without a deal, Greece is likely to default as it has a crucial payment due to the IMF end of June, when the four months extension of the rescue program expires as well. Against this background, the ECB will hold an unscheduled call to discuss ELA available to Greek banks as savers speed up withdrawals. With just a day after the Bank raised the ELA level by EUR 1.1bn on Wednesday, Athens may need to introduce capital controls as the banks may not have enough liquidity to open on Monday. The heightened uncertainty of an impending default, is likely be EUR-negative, while DAX and Eurostoxx 50 are likely to come under selling pressure.

•BoJ remains on hold, as expected The Bank of Japan ended its two-day policy meeting with no change in policy, as expected. However, the Bank maintained its upbeat assessment of the economy and seemed convinced that growth will strengthen enough to push inflation towards the 2% target. BoJ officials also took steps to improve transparency by releasing more information about their decisions. They plan to increase the number of economic outlook reports to four from two currently, and will also release a summary of opinions from policy meetings about a week after each meeting. The number of annual policy meetings will be reduced to 8 from 14 currently, starting from next year. These steps will bring its practices more in line with other major central banks. Despite the optimistic assessment, I believe that the bank needs to do more to reach their 2% inflation target. Nevertheless, I would expect them to wait at least until July before taking any more action, when the results of this year’s wage negotiation should be known and the MPC members will update their forecasts again. October, when the next official outlook report comes out, is the most likely month for them to change their program.

•Today’s highlights: Today, we have a relatively light calendar day with no major indicators to be released from Europe or the US. During the European day, the only noteworthy indicator we get is the Eurozone’s current account for April.

•From Canada, we get the CPI for May. Expectations are for the headline CPI to remain unchanged in pace, while the core rate is forecast to decelerate somewhat. The market is likely to focus more on the core rate, which could weaken CAD a bit. Retail sales for April are also coming out.

•As for the speakers, San Francisco Fed President John Williams, Cleveland Fed President Loretta Mester and Norges Bank Governor Oeystein Olsen speak.


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