Market Overview

7 August 2015

Weekly review: Next round of the Greek drama?

The Greek debt crisis and the first interest rate hike remain in focus, whereby the Greek debt crisis receded a little into the background. But I think the negotiations on the third Greek bailout programme will be difficult. The European Commission hopes to reach a deal by August 20 as Athens will have to repay €3.4 billion loans to the European Central Bank on August 20.

The German newspaper Bild reported yesterday that the German government doubts that a deal on a third bailout programme for Greece can be reached in August. The government believes that Greece will need another bridge loan.

In my opinion, another bridge loan will be needed as negations between Greece and its creditors has always been very tough. As the deadline approaches market participants will focus again on the Greek problem.

Market participants were focussed on the Fed this week. They were awaiting the release of the U.S. labour market data, with the hope, that the labour market data would be better than expected. But the labour market data was mixed. The U.S. economy added 215,000 jobs in July, missing expectations for a rise of 223,000 jobs, after a gain of 231,000 jobs in June. The U.S. unemployment rate remained unchanged at 5.3% in July, in line with expectations. Average hourly earnings rose 0.2% in July, in line with forecasts, after a flat reading in June.

Many market participants are awaiting that the Fed will start to hike its interest rate in September, despite the weak wage growth figures and low inflation. They will closely monitor the incoming U.S. economic data ahead of the next Fed monetary policy meeting in September.

I think the recent U.S. labour market data would not convince all Fed officials to start raising its interest rate in September.

Markets are expected to be volatile as investors remained focussed on the U.S. economic data and the Greek debt problem. It is likely that the currency pair EURUSD will test the level of $1.1000, maybe even the level of $1.0900, if a deal between Greece and its creditors is not reached or if the U.S. economic data will be negative. If there are some problems in the negotiations between Greece and its lenders or if the U.S. economic is better than expected, the currency pair EURUSD may test the level of $1.0800.

Konstantin Meinhardt
Market Focus

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

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