Disaster averted following the Greek parliament’s passing of a vote of confidence in the government and re-shuffled cabinet. The vote’s ‘For’ numbered 155, the votes ‘Against’ totalled 143 – the exact numbers of the ruling socialist PASOK party versus the combined total of the opposition parties. The Euro made cautious gains on the result, but focus has now shifted to next week’s additional austerity budget passage and more importantly, its implementation. The 100% support for Mr Papandreou’s mid-term budget from his own party in parliament, given it almost certainly being deeply unpopular with voters as a whole, looks far less secure. The clearance of yesterday’s 1st hurdle was just the start of what is going to be a very long steeplechase. Of greater market concern however should be the apparent lack of real progress by the EU as a whole in cobbling together a new debt strategy for Greece and the resulting fear that negotiations might drag on.
Today’s key event in the UK was the release of June’s MPC meeting minutes. Although the decisions by the Committee to keep interest rates unchanged and maintain the Quantitative Easing programme at £200bn were well anticipated, the minutes were used to determine the new dynamic on the Committee. The vote came in at 7-2 to keep rates at the historic low of 0.5% new member Ben Broadbent, who replaced the arch-hawk Andrew Sentance, joining the ‘no change’ camp. Comments in reaction to the recent soft reports for growth, both domestically and globally, combined with Sentance’s absence meant that the hawkish argument was less vocal. The sentiment was echoed by the Committee leading to the minutes themselves being more dovish than expected. Futures have suggested a rise in rates is unlikely before late 1st quarter 2012 at the earliest. Not good news for Sterling, especially given its current weak stature.
In the United States, the current Federal Market Open Committee meeting concludes with the market not anticipating any change in the official level of the Federal Funds rate. However, with today’s meeting coinciding with the expiry of the current emergency liquidity measures, QE2, the testimony from Fed Chairman Ben Bernanke will be all important. Whilst he is not expected to signal any further monetary accommodation, his rhetoric and tone will establish the near term path for the Dollar.
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