Prime Minister Alexis Tsipras has finally agreed a credible bailout deal with Greece’s creditors but there are still several hurdles to overcome. The bailout deal has many caveats, one of which includes a new trust fund set up, managed by Greece, with €50bn of Greek assets. Interestingly, this is being encouraged by Germany to be offshore. €25 billion will be allocated to fund recapitalisation of Greek banks, while the other half will go towards reducing Greece’s debt mountain. The main test now, is for Alexis Tsipras to convince his government on this pre-deal struck yesterday, but with the Greek people already voting for a unanimous no against further austerity and factions in the government saying they won’t support the agreement, this deal is still far from being agreed. At the moment the Euro is holding strong and this will continue so long as the deal proves to be sustainable in the short-term.
Away from Greece, the other issue for markets at the moment comes from China, who have also shown signs of improvement overnight. Trade data for China was bullish, with exports back into positive territory on the year-on-year measure. Since the 12th of June the Shanghai Composite has fallen 28%, with a total of 1500 company shares now suspended. Markets will be hoping the positive trend of last night will continue this week as we await key pieces of data including; GDP, industrial production and retail sales all released from the Redback.
Top tier data is expected from the UK, US and Eurozone which may add as a distraction from the ongoing problems in Greece. In the morning the focus will be on the UK with the inflation reading due. This will be followed by the Inflation Report where BOE Governor and several MPC members testify on inflation and the economic outlook before Parliament's Treasury Committee. Given the recent focus on interest rates this will be key for clues about the timing of the first rate hike in the UK. Also on the docket are the ZEW (institutional investors and analysts view) from both the Eurozone and Germany, whilst the US retail sales will dominate in the afternoon.