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Greece Misses Payment

Greece Submits Proposal to Bundle and Defer IMF Payments Until End of the Month

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With the nation quickly running out of cash, Greece moved to request an option to bundle payments due to the IMF in June as it seeks to buy more time to negotiate a compromise with creditors after rejecting the latest proposals. Painful economic and labor reforms demanded by creditors were flatly rebuffed as that nation seeks to exit crisis-driven policies.

Greece Postpones IMF Payment

Greece sent a proposal yesterday to the International Monetary Fund to bundle the payments for the month of June in an effort to buy more time just as the Greek finance ministry chose to reject the proposals from creditors. Claiming that the new set of reforms would have been extreme measures possibly exacerbating underlying unemployment general, Alexis Tsipras came out in support of the denunciation of creditor proposals. The EuroGroup has meanwhile set forth a new deadline for Greece to accept the proposals by June 8th, kicking the can to Monday as cash strapped Greece faces a full on bank panic with deposits fleeing accounts at a record pace. As such, the move to bundle payments gives Greece until the end of the month to effectively repay approximately $1.70 billion due to the IMF. The Euro is bouncing after responding negatively to the announcement, with EURGBP currently trading 0.40% higher.

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IMF Warns Fed Not to Raise Rates

The IMF yesterday chose to go ahead and reduce its forecasts for 2015 growth in the United States, revising GDP estimates to 2.50% after previously expecting 3.10% on an annualized basis. In a surprising move, the International Monetary Fund warned the Federal Reserve against raising interest rates this year, instead postponing the hikes until the first half of 2016, going head on against the Central Bank’s leadership which has telegraphed its intent to raise the benchmark rate to begin a process of normalization. Citing inflation and the overvalued dollar, the IMF is seeking to shelve any shift in monetary policy until wage growth and price gains are more firmly anchored. The institution also warned of noteworthy concerns related to the risks of shadow banking and lacking liquidity in bond markets. The dollar benefited from the comments, gaining broadly against peers as gold prices fell to the lowest since early May.

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Bank of England Leaves Rates Unchanged

In an unexpected move, the Bank of England left monetary policy unchanged, maintaining the benchmark interest rate at 0.50% with expectations that no change will be experienced until 2016. The outlook is very dependent on the inflation outlook after the latest print at -0.10% shows just how far the Central Bank is from its own inflation target of 2.00% The Bank of England must also contend with a slowdown in growth as GDP expansion fell to the lowest level since 2012 in the first quarter. The UK outlook was revised lower in May with expectations for 2015 growth falling to 2.50% and 2016 reduced to 1.60%. Policymakers are left with a challenging situation because even with unemployment touching a seven year low, the sluggish growth and lacking inflation mean raising rates could choke off growth further. The Pound fell on the announcement, with GBPUSD falling over 120 pips since the release.

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USDCAD Ascending Triangle Technical Pattern

The rebound in the US dollar comes ahead of today’s payroll data which is expected to show approximately 225,000 jobs added in May to the US economy. Should the number come in at or above expectations, it could see the dollar continue to appreciate against peers as timelines for rate hikes are shortened. Canada is also due to report unemployment, with a smaller margin of jobs added, any underperformance could add to upside in the USDCAD pair. The currency pair is currently consolidating between resistance at 1.2508 and the near-term uptrend in an ascending triangle pattern setting up since the beginning of the week. Should USDCAD move above the resistance level, this would signify an upside breakout which would be accompanied by renewed volume and momentum higher. A move below the uptrend line would signal the ascending triangle pattern breaking down and a potential reversal in the USDCAD pair.

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