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    The Day Ahead - Thursday 9th July 2015

    Greece’s debt crisis once again dominates major market headlines. Alexis Tsipras has promised that he will submit credible reform proposals on Thursday whilst lodging a formal request for a three-year ESM loan.

    The request for the loan from the European Stability Mechanism will be reviewed by technical experts tomorrow, with a grant seemingly required to get local banks operational again. As the market waits for the details of a new bailout proposal to come to light, and ultimately for the weekend’s decisions to occur a Reuters poll now shows that a Greek exit from the Eurozone is more likely than not as the level of emergency bank assistance from the ECB was kept steady, offering no new support.

    The Euro climbed around 70 pips on the day against the USD as short term traders appear to be putting the news to one side, knowing we’re not going to see a resolution for a few days at least.

    German hypocrisy has been alleged across social media with their hard-line stance on not cutting debt apparently going against the historical agreement that cut West-Germany’s post war debt in half. This is important because it helps to highlight that individual Eurozone members, especially one as influential as Germany will play a key role. If Angela Merkel and her parliament reject Greece’s bailout requests and stand in the way, it could be the final nail in the coffin for Greece’s membership of the single currency.

    Yesterday saw the UK budget released which saw a new National Living Wage to replace the lower minimum wage and a slow-down of welfare cuts. Student grants are to be scrapped and converted into loans whilst corporation tax is to be cut to 18% by 2020 were some of the key points. The pound lost around 1 cent against the USD overnight continuing the recent trend, although much of that cannot be contributed to the budget, but more to the recent trend of USD strength.

    FOMC minutes showed the economy was moving closer to conditions supporting a much anticipated first rise in interest rates although optimism was tempered by concern related to risks stemming from Greece and China. Some watchers think that instead of the forecasted two raises over the remainder of the year, we may only see one – largely depending on possible contagion across Europe.

    Thursday sees the UK interest rate decision at 14:00 GMT 3 which will come out as forecasted at 0.5% with other major releases including US unemployment claims at 15:30. Having beet expectations last week, people will be looking for continued signs of economic strength.
    Kicking off the day, at 04:30, 11:30 local time we’ll see Aussie unemployment which is forecast to see an increase to 6.1%. At the same time, we will see the release of China CPI currently forecast at 1.3%.

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