With Greek referendum taking place over the weekend on whether the country should accept the current deal stipulations (even if that deal isn’t technically on the table anymore), the $1.6 billion IMF non-repayment default passed with less fanfare than one would expect.
The focus is now firmly on the referendum, something that only intensified after a mid-week surge of optimism fizzled out. The optimism was based on reports that Tsipras was willing to sign a deal with minor amendments, but the decision by the country’s creditors, led by Wolfgang Schauble in a Eurogroup teleconference, to refuse further talks until after the vote had been held sapped away the market positivity and left Sunday as the latest in a long line of Greek crunch days. This itself had followed an attempt by Greece to request a 3rd bailout, a 2-year deal supported by the ESM, before its last bailout deal expired on Tuesday.
The Greek finance minister stated he would ‘rather cut off his arm’ than sign a deal lacking debt-relief provision, claiming he could resign if the ‘yes’ vote prevailed. In regard to the debt-relief issue, the IMF released a report that will no doubt be an irritant to the majority of Greece’s creditors, stating that the country needs an extra €60 billion relief program alongside debt relief in any new deal and a 20 year grace period for any repayments, labelling the Greek debt ‘unsustainable’.
The polls, for what they are worth show the ‘yes’ and ‘no’ votes almost neck and neck, with nearly 12% of the country undecided. If the ‘no’ vote wins then, who knows? Tsipras has been adamant that the referendum isn’t on Greece’s position in the euro, but a rejection of a deal by the Greek people puts the creditors in an unprecedented situation, and could finally set in motion the long-discussed Grexit.
Whilst the Eurozone thrashed out the latest twists and turns in the interminable Greek saga, the US markets had a long line of data to deal with this week. A post-100 consumer confidence figure, strong manufacturing PMIs and a better than expected ADP non-farm number all set up hawkish vibes.
With the government released non-farm figure brought forward due to the 4th July weekend, the number had a tough task in matching last month’s impressive 280k. It was a task it couldn’t manage, posting 223k, the lower end of estimates, whilst seeing that muscular 280k revised down to a less spectacular, if still solid, 254k. The unemployment rate fell to 5.3% but following issues with labour market participation figures (which fell to levels not seen since 1977) and stagnant wage growth, reactions were decidedly mixed.
Those numbers, especially non-farm, are still solid and aren’t the rate hike squashing figures that some quarters suggested. However, it shows there is still room for improvement in the jobs sector; whether too much improvement is needed to make the much rumoured September lift off feasible is up for debate.
Gold has struggled, given the market uncertainty at the moment, the precious metal really should be doing better than it is; however, the overall strength of the dollar is still harming gold, which shed around $15 as the week went on.