Greece deadline moved to June/July- Weekly Currency Forecast

Some of you may re call that I wrote an article last month about why the Greece deadline won't be until June/July and as of last week, this has started to come into fruition.

It seems that Greece managed to pay back the IMF on the 12th May, by borrowing money from... The IMF! Greece managed to pay back €750 million to the IMF on May 12th, without the assistance of European creditors who are withholding the last remaining tranche of € 7.2 billion of Greek bailout program. To pay back the IMF, Greece had to tap an emergency account fund that it holds with IMF. This means Greece paid back IMF by borrowing from the IMF.

Now I know to many of you this may sound bizarre, but this is something that we saw coming- however now this deadline is out of the way, the focus now shifts on to the next repayment- which is June 5th 2015- where Greece are supposed to pay the IMF €300 Million- however the problem is that the IMF has warned Euro zone creditors that talks are heading nowhere and without any debt restructuring/write offs by Euro area creditors, IMF will be forced to withhold € 3.6 billion contribution in Greece's remaining € 7.2 billion payment tranche. All this reveals is that Greece is very close to bankruptcy, and with salaries and pensions to pay out every month, there will be problems ahead for them.

Right now we are not seeing the market move because of what is happening in Greece, however I would say that keeping yourself in the loop is sensible because over the next 2 months Greece will become a pinnacle market mover for the Euro.

Now we have covered the back ground of the markets- let's move to what is happening at the forefront- On Tuesday we have CPI data (Inflation) out of the UK- which are expected just above 0%- however there has been many articles out today suggesting that the figure may come out just under- which would prove that deflation is happening in the UK- this would not be surprising after last week's growth cuts in the UK and recent retail sales figures. On the flip side we have the same data coming out of Europe- which may tell a completely different story- after the QE in the Euro Zone we are now expecting inflation to begin to rise slowly, so we are expecting a better figure out of Europe on this piece of data.

Wednesday is another key day on the markets with both the BoE & Fed minutes will be released on this day, Though the UK growth forecasts have been cut, the UK economy has still made significant progress, which means that we may not see a 9-0 vote against \an interest rate hike, I think that the maximum we will see is 7-2 with 2 in favour of an interest rate hike. The minutes out of the USA will be even more interesting, the U.S Dollar has been weakening significantly over the last 3 weeks due to weak data out of America- we have seen the exchange rate go from 1.47 up to 1.57. The reason for the massive shift is that weak data suggests that the Fed may not do anything to their interest rates in June, and these minutes should back that up- however it must be noted that Charles Evans- Federal Reserve Member- hinted that a June interest rate hike is not off the cards yet, so these minutes will still be one to watch out for!

If you have any requirements over the next few months and would like further information on how to mitigate your exposure on the market then please do not hesitate to contact me directly on 01322 319 550 or email me at prem.raja@currencies4you.com