Doubt over Greek deal starts to creep in

Wednesday, July 15, 2015

There were increasing doubts surrounding the approval of Greece’s latest bailout after the IMF argued that substantial debt relief needed to be offered by creditors. Threatening to walk away from the deal, the IMF highlighted that debt relief “far beyond” what creditor nations were offering was needed and with the current burden estimated at over 200% of Greece’s GDP over the next two years, a haircut could now potentially be considered. However, the comments from the IMF stand in stark contrast to Germany’s opposition for debt relief as tensions between Angela Merkel and Alexis Tsipras reached their limit after months of negotiations. Both leaders still need to seek the approval of the final terms from their respective country’s lawmakers and any further amendments may stall progress in what has already been an arduous trial.

China’s second quarter GDP grew by more than expected, providing further proof that stimulus measures instigated by policymakers in Beijing were starting to have a positive impact. Q2 GDP increased by 7.0% y/y mirroring the 7.0% y/y growth seen during the first quarter and coming in better than the 6.8% forecast by economists. With growth holding firm at 7.0% for the first half of the year after a gradual slowdown throughout 2014 market participants are quietly optimistic that growth targets set by Beijing for 2015 can be achieved and with global economic conditions steadily improving the risks of slowing output are starting to fade. GDP data wasn’t the only bright spot in today’s release of Chinese economic data as retails sales and industrial production data for June both surpassed expectations, expanding by 10.6% y/y and 6.8% y/y, respectively. Economists polled by Bloomberg had expected a 10.2% y/y increase in retail sales and a 6.0% y/y increase in industrial output but the stronger than anticipated figures indicate momentum in China is gaining pace.

Bank of England governor Mark Carney provided further hints of a rates rise in the near future as concerns of persistently low inflation were brushed aside. The governor, responding to questioning by the Treasury select committee, outlined the potential path for an impending rates rise in the UK, stating that any increases would be gradual and limited. Providing further guidance, Mr Carney suggested that rising costs, improving wages and the above normal growth of the UK economy would spur policymakers to act in the coming months but otherwise did not provide any concrete timeline. Expectations of a rates rise saw sterling lift off support at 1.5500 yesterday despite CPI slipping to 0.00% m/m in June from 0.2% m/m the previous month. The pound rallied above 1.5600 against the dollar and activity early this morning has seen sterling shore up support at yesterday’s close, pushing towards 1.5670 early on. Today’s key release of unemployment statistics will be watched closely with any material improvement strengthening the case for an incoming rates rise. Economists expect the ILO unemployment rate to hold firm at 5.5% for the three months till May with jobless claims anticipated to decline by 9000 in June from a 6500 decline the previous month.

Chinese Q2 GDP stable at 7.0% y/y

CNGDPYOY Index China GDP Consta 2015 07 15 07 49 58

Sterling extends gains against dollar on rates outlook

GBP Curncy British Pound Spot 2015 07 15 08 06 20

Events for today




Retail Sales & Industrial Production








Claimant Count




NY Fed Manufacturing




EIA Energy Stocks




Fed Beige Book


Aug  Brent Crude (ICE) 

Topics: GDP, China, EUR, GBP, Greece
More from: Kash Kamal