With Greece having agreed to a bailout deal, at least in principal, on Monday morning and the vote not taking place in its parliament until tomorrow, investors are free to focus on other things on Tuesday and fortunately, there is no lack of alternatives with a number of key economic events lined up.
It’s worth noting that Greece won’t fall completely off the radar today and there is likely to be plenty of opinions floating around from officials in relation to the deal and the votes in the different parliaments this week. If at any stage it appears there is a chance that the bailout may not be passed through any particular parliament, particularly in Greece or Germany, we could see widespread panic all over again as we’d basically be back to square one. Hopefully that won’t happen although it is far from certain at this stage that the voting this week, starting tomorrow in Greece, will go smoothly.
For now, there’s plenty more for investors to be focusing on, particularly in the U.K. where we’ll get the latest inflation data for June. Bank of England Governor Mark Carney will then testify early this afternoon on the Financial Stability Report before the Treasury Select Committee.
The inflation readings are likely to remain subdued, with overall inflation not seen changing while core inflation is expected to remain at 0.9% on the year. Both of these should begin to improve later this year as the impact of the oil price decline fades and higher wages start to provide inflationary pressures, assuming of course they can be sustained.
Carney’s testimony before the Treasury Select Committee is rarely a straight forward event and the questions don’t always necessarily stick to topic. The events surrounding Greece are likely to be discussed, including how a deal will benefit the economy and the impact it will have on monetary policy given that one of the key risks has, touch wood, been averted. They could also touch on the outlook for the U.K. economy following the election and the impact of the latest budget on it – they always like to get quite political. Whatever they discuss, we’re sure to learn more about Carney’s views on the monetary policy outlook and markets will be waiting to respond.
Also this morning we’ll get the eurozone and German economic sentiment readings from ZEW. These have taken a hit in recent months, impacted largely by the threat of a Grexit, and they are expected to decline again today. We can’t read too much into any decline today, especially as a solution for Greece, or at least the averting of a more serious crisis, may have now been found. This could benefit these numbers in the months ahead.
Also today we’ll get the latest retail sales figures from the U.S.. With focus in the coming weeks likely to shift largely from Greece to the U.S. and the first interest rate hike, U.S. data is once again going to be heavily analysed. Retail sales figures are an important indicator as they offer insight into consumer sentiment and therefore future inflation, which is particularly important right now given that it has been largely responsible for the Federal Reserve holding off on rate hikes until now. The labour market has improved dramatically but wages and, particularly this year, spending have been slow to catch up. If they do then lift-off for interest rates could come this year.