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Greece Passes Bailout Measures

Implementation of Measures Pave the Way for Bailout Negotiations

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The passage of the final set of bailout measures needed to win the Troika’s approval for another round of bailout negotiations passed through the Greek Parliament last night with the support of the opposition party after many Syriza members openly decried the measures, voting against the process.

Tsipras Pushes Bailout Forward

The beleaguered Greek Prime Minister managed to claim a victory yesterday after managing to reach across the aisle to the coalition’s opposition factions to garner their support for institution of additional measures to unlock negotiations with creditors. Dissent and mutiny within Syriza is cause for concern as the party splits down the middle into camps for and against further bailouts. This is raising the specter of snap elections to be called in coming months, especially with an additional vote in August on the matter of pensions and farm taxes which are projected to be explosive votes with staunch opposition. Meanwhile, capital controls remain in effect with withdrawal limits for bank customers. The ECB raised the ELA bank support facility once more to accommodate continued Greek deposit outflows as bankers beg and plead for customers to return cash to banks.

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New Zealand Drops Rates

In a widely expected move, the Reserve Bank of New Zealand cut the benchmark interest rate by 25 basis points overnight from 3.25% to 3.00% while citing the potential for further easing in the pipeline to accompany the vulnerability of the outlook. This latest cut to the key rate comes after the Central Bank moved to cut rates in June in response to weaker dairy prices and higher fuel costs. RBNZ Governor Wheeler alluded to the external factors impacting the outlook including developments in China and Europe as the basis for remaining accommodative in its policy view. Inflation remains beneath the long-run target between 1.00-3.00% and furthermore, the Central Bank thinks the New Zealand dollar is still too strong, raising the possibility of further cuts to fight deflation and below-trend growth. The NZDUSD pair has risen sharply since the announcement, climbing over 70 pips.

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Inventories Send Crude Lower

The Department of Energy crude oil inventory figures released yesterday showed another surprising build to inventories following several weeks of volatility in the figure which has seen stockpiles swing between gains and losses. Yesterday’s number saw seasonal inventory levels rise to the highest point in 80-years as concerns about total storage capacity reemerge. Inventories remain only once source of trepidation for the American energy industry which has borrowed in excess of $500 billion in the last five years for development and investment projects. The rapid fall in oil prices has tested firms operating on razor-thin margins, with any further collapse in prices likely to trigger multiple credit events, especially in high-yield bonds. Weakness in the credit cycle could spark another recession in the economy as losses in junk bonds spread to other asset classes. Meanwhile, crude oil prices continue to give ground, with WTI testing the $49 handle.

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GBPUSD Ascending Triangle Technical Pattern

Continued economic momentum in the UK economy has greatly benefited the Pound as speculators anticipate rates to rise sooner rather than later, trumpeting a similar tone to the Bank of England which is find the situation increasingly ideal for a rate hike. Coupled with the emphasis on returning the Government budget to surplus and tackling the debt problem, the proactive stance of UK policymakers from both a monetary policy and fiscal policy perspective is contributing to renewed optimism in GBP. The ascending triangle pattern emerging in GBPUSD is formed by the consolidation between resistance and a near-term uptrend. The formation exhibits a bullish bias with any move above resistance at 1.5650 considered an upside breakout to be accompanied by renewed momentum and volume higher. However, should the pair move below the trendline, it could indicate a breakdown in the pattern and potential reversal downwards.

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