IMF urge Fed rate delay 2

Yesterday’s markets

5th June 2015

  • BoE Meeting
  • US Weekly jobless claims

Greece continue to dominate headlines as the Greek PM Tsipras spoke yesterday. We also had the Bank of England rate decision and an IMF announcement. Greece have now told the IMF that it will not be making its €300m debt repayment today, and will bundle all four of its June payments together. The delay in this initial payment may also be a negotiation tactic, trying to put pressure on the EU and IMF in trying to reach a deal with Athens. After talks finished in Brussels in the early hours of Thursday, Mr Tsipras said that a deal with Greece’s creditors was “in sight”. However the Eurozone’s finance ministers who were involved in these negotiations told a different story, that there is still quite a large gap from an agreement being reached. High level talks are set to resume between Athens and its creditors today as this situation still remains unclear.

After yesterday’s poor UK data where the tertiary sector posted its weakest economic expansion since Q1 2012, Bank of England officials are unlikely to be in any rush to raise rates. The decision of course was a foregone conclusion and rates in the UK remain at record lows of 0.5%. Interest rates have been unchanged since March 2009 and should remain low until next year.

The International Monetary Fund urged the Federal Reserve yesterday to delay raising the main benchmark rate until the first half of 2016. The IMF also cut the US growth forecast for the second time this year, now down to 2.5% for the year. The IMF went on to suggest that the Dollar was “moderately overvalued” and a further marked appreciation would be “harmful”. Markets still expect the Fed to raise interest rates this year if the economy continues to meet Fed Chair Janet Yellen’s forecasts.

Today’s markets

4th June 2015

  • UK House price index
  • OPEC Meeting
  • US Non farm payrolls
  • US Unemployment rate

Today’s focus will surround the all-important non-farm pay rolls figure, released at 13:30 GMT this afternoon. This could be crucial in determining the FOMC’s decision on interest rate later in the month. Non Farms are forecast at 226k, slightly higher than the previous 223k. We also have the continuation of the OPEC meetings and the US unemployment rate forecast to remain sticky at 5.4%.