Greece Officially Defaults On Loans

Greece officially entered a default on its debt repayments to the International Monetary Fund yesterday, setting a precedent in which Greece has become the first developed country to miss an IMF loan repayment. Last-minute requests made by Greece for financial aid were left unanswered. The next big date of interest is July 5th, when a referendum on whether to accept the creditors’ proposal will be held in Greece. A recent poll suggested that 54% of Greeks oppose the bailout proposal, while 33% are in favor. However, other polls have provided different results, suggesting that the gap is narrower than previously thought. As expected, European stock markets showed substantial declines yesterday. The UK’s FTSE fell 1.5% to trade at 6520.98. The German DAX fell 1.25% to trade at 10944.97, and the French CAC fell 1.63% to close the trading day at 4790.2.

In the meantime, U.S. stocks reversed some of the previous day’s losses, as traders followed the Greek drama. Tuesday proved to be the market’s worst day so far this year, highlighting the concerns surrounding the consequences of Greek’s default. The Standard and Poor’s 500 Index gained 0.27% to close the day at 2063.11, the Dow Jones Industrial Average gained 0.13% to trade at 17619.51, and the Nasdaq added 0.57% to trade at 4986.87. While the Greek drama is certainly dominating the news, the prospect of a U.S. interest rate is still very much in play. In a speech made at the University of Oxford, Federal Reserve Vice Chairman Stanley Fischer said that the U.S. economy grew at around 2.5% annually for the second quarter. More importantly, he stated that the central bank will raise interest rates if there are further improvements in the labor market. This highlights tomorrow’s Nonfarm payroll report and its possible effect on the dollar. If today’s data proves to be in line with Fischer’s comments, it’s likely that the dollar will surge on the prospect of an incoming interest rate hike. Other Fed officials have stated in the last few days that a September hike was still a possibility.

The coming days offer a number of important economic data releases. As previously mentioned, the U.S. nonfarm payroll report will be released tomorrow. ADP’s preliminary survey will be released today but may deviate from the official report. The Energy Information Administration (EIA) will report crude oil stockpiles and the U.S. unemployment rate will be released today.