European markets and U.S. Futures are trading modestly higher this morning as the political and monetary policies weigh. The Greek government is still in a constant battle with its creditors to strike a deal, but there are no fruitful results so far. The country is completely strangled and strapped for cash as the next deadline to pay their bill is approaching fast and furiously. This week and the next few weeks are extremely important as Greece will not only need find a way to pay the wages and pensions, but also another IMF payment of 1.6 billion euro is due during the next month.
Of course, the first deadline for the IMF payment is the June 5th and so far all the chatter is about this deadline and the finance minister of Greece along with many other officials have assured that they are very close to finalise the deal so that they can unlock their much needed cash from the creditors- but if any of these claims have any solid foundation which traders can use to position their trades, we are not very optimistic about this.
Most importantly, traders should also be mindful that Greece can always combine the series of payment which are due next month as one payment and this give them more time to negotiate their deal. However, the question is how much of this time they really need to hammer out a deal, as time is the most overlook cost between the two parties which is destroying the economic growth. If we had this deal finalised early this year and we had not seen this toe dragging process, not only Greece, but the whole picture of the Eurozone would have been much different.
U.S. markets suffered their sell off yesterday on the back of the economic data which fanned the fire that rate hike will soon be hitting the headlines this year. Is this is really a concern or is this is really something that we do not know or we are not expecting? Obviously not, because the next big announcement without any denial after the tapering news will have to be rate hike and the current sell off is nothing but an overreaction or rate hike tantrum. Investors have to get used to the idea that the rate hike is going to take place and this is not a matter of worry because the Fed cannot run the ultra loose monetary policy forever. The only concern should only be the pace of these rate hike which we very well believe will be very gradual and well communicated.
The U.S. economic data are the major element which will determine how early this year rate hike will take place and the September timetable may start looking more appealing soon we see more robust economic data start painting the walls.
Disclosure & Disclaimer: The above is for informational purposes only and NOT to be construed as specific trading advice. responsibility for trade decisions is solely with the reader.
by Naeem Aslam