Another day of back and forth between Greek officials and its creditors with no deal, and the cracks are starting to show. The wind in the trees through Brussels is no longer so together. Yesterday, for the first time this year, there was talk that the EU Commission – which had been supportive of Greece and its efforts – was starting to lose confidence in the prospects and willingness of a deal being struck.
Whatever proposals are being worked on, however, they still need to be ratified and voted upon by an increasingly split Greek government and parliament. Tsipras may be angling for a deal but a large number of Syriza MPs are unhappy with the party’s policy on paying back creditors such as the IMF before paying money away in the form of public sector wages and pensions.
The nightmare scenario remains that a deal between Greece and its creditors is struck at the 11th hour but then voted down internally within Greece. If no time is left to renegotiate further, then default, capital controls and a Greek exit from the Eurozone are all the more probable.
Euro volatile, but dollar the biggest loser
Euro was volatile yesterday amid all this, but was mainly driven higher as global bonds continued to sell off. Yields on German debt have calmed down since last week’s sell-off but pressures remain. The dollar was the main casualty of the yield slips higher, as higher oil prices gave the USD something else to think about.
The main mover through the next 24 hours is likely to be sterling. This morning’s manufacturing and industrial production numbers are important given the falls in PMIs in recent months but tonight’s speeches from Bank of England Governor Carney and Chancellor George Osborne have the ability to fly or crash the pound.
Focus on Carney speech
Carney is likely to focus on inflation and wage matters within the UK economy and we hope that he makes sure that any language around rate rises is not as incendiary as last year’s speech. For George Osborne the topic is a little less easy to call but if he doesn’t cosy up to bankers, given yesterday’s news on HSBC job cuts, then I would be very surprised.
