Greece and the Fed set the market tone

Greece and the Fed set the market tone

The end of the last week reveals two key market drivers that will determine the fluctuations in the foreign exchange and other markets in the near future. We are talking about the solution of the Greek issue and the next meeting of the Fed, which is expected to increase rates. Now, first things come first.

The Greek issue outlines some solutions. At least, the IMF expressed its readiness to participate in aid to Athens. But at the same time, the Greek authorities are required of clear reforms plan. In principle, these requirements are not new. Every time where there is a need to pay another part of the debt, and Greece needs the money, lenders are beginning to demand reforms plan from Athens.

Representatives of the IMF noted that in order to acquire a participation of the organization in the Greece support, both real political action and relief of debt burden are needed. The second point is addressed directly to the creditors.

Greece is required of pension reform (Greek government refuses it so far). As for the debt restructuring, it is mainly in favor of all lenders, except Germany.

According to experts, a rational approach, in which Athens will be provided with new benefits (sharing more expensive credit commitments to less expensive), seems quite reasonable. But the decision is not up to the IMF, but to the lenders and Greece.

In July of this year, Greece has to pay 3.5 billion Euros to the ECB. The meeting of the European Group on the Greek issue is scheduled on May 24. In this meeting it is planned to adopt an action plan for Athens, taking into account various development scenarios.

At the same time, the media are now actively discussing the possibility of interest rates increase in US. The April Fed meeting minutes published last week became a complete surprise. According to many experts, the Fed could go to the next stage of monetary tightening in June.

Another interesting fact is that a couple of months ago, such steps are practically not even considered. The fact is that after the rate increase to the range of 0.25-0.5% situation in the US economy has kind of deteriorated. Fed officials have repeatedly changed their forecasts to the downtrend. But now the situation has suddenly changed.

The publication of statistics on the labor market is expected in the beginning of June. But even without it, it is clear that in this sector things are far from being the worst way in the United States. Despite the fact that economic growth in the first quarter was only 0.5 percent, retail sales reached a record level for this year.

By the way, the Bloomberg revised chances of rates growth in the next Fed meeting. They were assessed only 4 percent last week. But after the publication of the Fed minutes, the chances were increased to 32 percent! Investors are skeptical of such a term. The events of this winter are still fresh in the memory: after raising rates the situation in world trade began to deteriorate rapidly.

However, binary options traders have some advantages here. The continued strengthening of the US dollar until the Fed meeting scheduled for mid-June is possible. Amid sharpening of the Greek question, such a prospect is becoming more apparent.


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