EUR/USD remains the prevailing focus on Greece and Fed policy. The pair hit a 2-week low at 1.1134 Tuesday and has since settled higher, in the low 1.12s but still well off yesterday’s high at 1.1347. A much weaker than expected German Ifo business confidence reading, which fell to 107.4 from 108.5 and below the median for 108.1, had little impact. The market is in cautious mood. An agreement between Greece and its creditors needs to be reached in time for Finance Ministers to sign off at the Eurogroup meeting this evening, ahead of Thursday’s EU summit.
The deal between Greece and the EU hierarchy would then need to be passed by both the Greek and German parliaments. Regarding the Fed, September still seems the best guess for rate lift-off, though it’s still not a done deal as indicated by Governor Powell’s 50-50 outlook Tuesday. News on Greece remain confusing, ahead of the crucial meeting between Tsipras and top creditor officials from ECB, IMF, ESM, EU and Eurogroup.
Leaks suggest even IMF head Lagarde sounded optimistic that an agreement can be reached. It seems doubtful that this will be the last we hear from Greece and there still is plenty that can go wrong, before even this agreement is rubber stamped, but at long last things are moving in the right direction and receding Greek exit fears are keeping Eurozone markets with an upward bias. IMF said it would be flexible on Greek repayment, if it is delayed a few days beyond the June 30 deadline, as long as there is an agreement in place, according to Greek Economy Minister Stathakis.
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