Sunday, June 7, 2015

Gloves are off in Greece bailout talks | Non-Farm payrolls do the business

Two new developments have served to further heighten tensions between Greece and its creditors in the EU and the IMF. It appears that the previously ever-patient Jean-Claude Juncker, President of the EU Commission and the man often seen smiling at and back-slapping the Greek Prime Minister, Alexis Tsipras, has reached the end of his tether. At the G7 meeting in Bavaria, he is reported by the Guardian newspaper to have become very angry at the repeated delays by Tsipras in presenting proposals to counter those put forward by the EU and the IMF last week. The Greek government has long been at loggerheads with the ECB and Germany. They can ill afford to lose the goodwill of such as the Commission president.

Separately, while Greece was able to legally, if highly unusually, opt to roll-up all of its remaining repayments to the IMF into one large payment which will become due next month, the IMF Managing Director, Christine Lagarde, has firmly rejected any possibility that this payment can itself be delayed. She used the same formula that Mario Draghi often brings forward, that the IMF is a “rules based organisation”, and so such a postponement is simply not possible, even if it were desired to give Greece such a concession.

It is now acknowledged by all that Greece has come to the end of the line in terms of producing funds from anywhere, so in the absence of agreement to unlock further IMF and EU funding, it will default.

Non-Farm payrolls do the business

The US dollar was on a tear in the afternoon on Friday, rising against all of its global counterparts on the release of much better than expected Non-Farm Payroll figures by the US Bureau of Labor Statistics.

Reuters is reporting this morning that a number of commentators in Asian Forex trading institutions have intimated that it is their belief that the Federal Reserve will now raise rates not once, but twice this year. They have timed the first one for next September, with a further rise before the end of the year.

The US economy might not be out of the woods yet, however. Despite the excellent headline figure, and the fact that the last two months’ figures were revised upward, the unemployment rate has still risen, to 5.5%. This is, apparently, due to the fact that more people are coming back into the workforce and are actively looking for employment, now that the prospects of finding a job have improved.

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