Euro stays weak against dollar, yen and sterling after Greek parliament passed a set of critical austerity measures to secure the new three year bailout that worth EUR 86b. Prime minister Alexis Tsipras's package was passed with 229 votes in favor and 64 votes against in the 300 seat parliament. 38 of Tsipras' ruling party voted against, including former finance minister Yanis Varoufaskis. Focus will now shift to Eurozone finance ministers who will hold a conference call today. Meanwhile, EU is considering to provide a EUR 7b bridge financing to Greece that will cover a EUR 3.5b payment to ECB due on July 20. Another focus is today's ECB meeting, where the central bank is widely expected to keep policies unchanged.
Dollar was boosted by the upbeat comments from Fed chair Janet Yellen overnight. In her prepared remarks for the testimony before the House Financial Services Committee, Yellen reiterated that "if the economy evolves as we expect, economic conditions likely would make it appropriate at some point this year to raise the federal funds rate target." Meanwhile, she expected economic recovery to "to strengthen over the remainder of this year and the unemployment rate to decline gradually." Also, she noted that "economic growth abroad could also pick up more quickly than observers generally anticipate, providing additional support for U.S. economic activity." And, she's optimistic that "the U.S. economy also might snap back more quickly as the transitory influences holding down first-half growth fade and the boost to consumer spending from low oil prices shows through more definitively."
Fed's Beige Book economic reported showed that economic activity expanded in all 12 districts in the period from mid-May through June. Consumer spending rose in general as lifted by lower energy prices. But manufacturing was uneven with three districts reported decline. Residential real estate was positive with house prices generally up over the period. Employment market performed well with most districts reported strong job growth. Wage pressures remained generally modest, though. Overall, the report suggested that the US economy continued to grow modestly across all districts.
Canadian dollar remained one of the weakest major currency this week. The Bank of Canada reduced the overnight rate by -25 bps to 0.5%, the lowest level since June 2010. It noted that headline inflation remained weak and was mainly pressured by low energy prices. On economic developments, the central bank acknowledged that the slowdown in growth in 1Q15 was driven by a scaling back in energy investment and weaker than expected non-energy investment. Yet, it expected growth would remain weak in the second quarter. As such, the BOC revised "significantly downgraded" its GDP growth forecasts. We expect the rate cut would provide only limited addition stimulus to the economy. More in BOC Cut Overnight Rate to 0.5%, Downgraded Growth Forecast "Significantly".
Loonie's weakness was overwhelmed by Kiwi, which extended recent down trend after inflation data. CPI rose 0.4% qoq in Q2, below expectation of 0.5% qoq. Business NZ manufacturing index rose to 55.2 in June. There are speculations that weak inflation reading and falling dairy prices would prompt RBNZ to have another rate cut by 25bps to 3% in July. NZD/USD's down trend picked up momentum against and dives to as low as 0.6505 so far this week. Near term outlook stays bearish as long as 0.6770 resistance holds. Deeper fall should be seen to 100% projection of 0.8835 to 0.7174 from 0.7743 at 0.6082.
Looking ahead, ECB policy decision and press conference will be a major focus today. Also, Eurozone will release trade balance and CPI. Swiss will release retail sales. From US, jobless claims, Philly Fed survey and NAHB housing market index will be featured.