German Parliament Set to Vote Today on Renewing Negotiations for Another Greek Bailout
With most national parliaments on board when it comes to the latest Greek aid measures, the one remaining holdout yet to vote on the measures is Germany. Although Angela Merkel is trying to rally party members around the newest measures, there is substantial opposition to another deal to aid the Greeks. Members are concerned that throwing good money after bad sets a bad precedent with others insistent that the best policy going forward is letting Greece exit so the Euro Area can strengthen once more. Germany continues to reject growing calls for debt relief, with even the European Central Bank noting the importance of haircuts and writedowns, complementing IMF comments on the issue. The ECB meanwhile has extended support for Greek banks after leaving the key interest rate on hold yesterday at 0.05%.
Across the Atlantic, Federal Reserve Chair Janet Yellen concluded her second day of congressional testimony, fielding a range of questions from Senators on matters related to regulation and monetary policy. She emphasized on more than one occasion the mandate by congress for the Central Bank to target unemployment and inflation as key metrics as opposed to the stock market as certain members of the Senate alluded to. Yellen maintained that the Federal Reserve will tighten monetary policy at a gradual pace, with an emphasis on slowly increasing the benchmark. However, she will not wait forever, with anticipation that the key rate will rise as high as 0.75% before the end of 2015. The dollar managed to hold onto gains and appreciate further while stocks remained bid after her comments stating the Fed’s lack of concern regarding movements in stock benchmarks.
The first oil tanker to leave Iranian ports is steaming towards Asia as the accord paves the way for Iran to restart oil exports. However, this is a problematic from the perspective of lingering oversupply issues with OPEC widely exceeding the aggregate production quotas for the cartel. Adding additional Iranian supplies to the mix could creation further supply distortions to the tune of several million barrels per day, outstripping demand by a wide margin. Oil prices remain weak amid the reports that the Cushing oil storage facility might be seeing growing inventory concerns once more as stockpiles held in storage build. The WTI and Brent benchmarks remain near critical support levels, with any break to the downside paving the way towards further losses in oil prices. However, contrary to the movements in oil, natural gas prices remain elevated on the back of greater utility demand.
EURGBP Downward Trending Channel Trading Opportunity
Continued uncertainty facing the Eurozone combined with the Bank of England eyeing higher interest rates has set the stage for further losses in the EURGBP pair. With today’s vote determining the next steps for the Greek debacle, a lot is on the line today for Europe as it seeks to restore investor confidence in the region. Meanwhile, the Bank of England is preparing markets for higher interest rates as evidenced by comments earlier in the week from Governor Mark Carney. The softness in EURGBP has seen the currency pair trending lower in a channel pattern exhibiting a bearish bias. Ideal positions taken near the upper channel line are targeting the lower channel line. Fighting the prevailing downtrend with long positions is not suggested due to the worsening risk-reward characteristics of the trade.