You can never underestimate the importance of the right personality in negotiations. It is just possible that the new Greek Finance Minister, Euclid Tsakalotos, is buying in to the process more readily than his presumably hard line leftist predecessor Yanis Varoufakis. That has to be the hope, as the Greek government has submitted new plans to Greece’s creditors that looks rather close to what creditors were seeking two weeks ago:
- An overhaul of the system for V.A.T
- And re-working of the pensions system
You may recall that these were precisely the issues that were rejected by the referendum just last weekend. I’m not even going to try to rationalise the logic of this, but perhaps with a first name such as he has, the Finance Minister has done the maths, and considers a successful negotiation the best solution for Greece. If this were football it would be the last minute of extra time and the referee is taking every opportunity to check his watch. It’s really that close now. By all accounts the plan was approved by the Greek cabinet despite some last minute objections by the most left leaning cabinet members. Tsipras has stated that the Greek government is ready to compromise, let’s see where it leads us.
It’s always interesting hearing anecdotes on the ground, and according to a story in the Financial Times this morning, the Bulgarian Lev, the currency of the Greece’s north eastern neighbour is now good for use in some establishments in parts of Greece. That tells us a lot. Psychologically the Greeks might just be getting used to life without the euro.
As expected the Bank of England kept interest rates unchanged at 0.5% yesterday. No one was expecting otherwise. Governor Carney has warned that while inflation remains low at the moment, it is expected to pick up going in to the end of the year. The expectation is for the first hike to happen sometime in the first half of 2016.
There isn’t much significant macro data published today. In the Far East, Chinese equities have continued their recovery with shares higher today. It has been interesting watching how the Japanese yen has been used as a flight to quality resource in the recent situation. Today USD/JPY is slightly higher (despite the dollar being generally weaker against other currencies) which might be an indication that normality is returning. For now it looks like investors are suitably impressed with the credibility of the attempts made by Chinese authorities to stabilise the market.
This morning currency markets show a slightly weakening US dollar, it looks as if the market is taking a breather from the moves of earlier in the week. We still contend that the general trend is for a stronger US dollar, but it might take more news from Greece to add impetus to the currency markets.
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