Tuesday, June 23, 2015
Investors have become a bit more optimistic about the possibility of a Greek bailout deal being reached after EU officials actually call the country’s new budget proposals “a positive step forward.” This is a big change from sentiment expressed towards previous proposals. The European Central Bank (ECB) also offered up some relief by again raising the ceiling on emergency liquidity funds to support Greek banks, which seemed to ease the pace of bank withdrawals yesterday. The problem is I’m starting to hear more professional traders talking about a possible lose-lose scenario following a Greek and EU debt deal announcement. The theory is if EU leaders do NOT reach some-type of a compromise with Greece, the fears surrounding a banking meltdown become more of a reality and contagion across the EU becomes a more serious concern. These concerns would obviously push the U.S. dollar higher. If the EU and Greece leaders are able to ink some type of new deal, it may bring along more monetary manipulation by Draghi and the ECB. It more than likely also opens the door for the U.S. Fed to raise interest rates. Many insiders believe if the EU can avoid a meltdown with Greece and put at least a temporary bandaid on the situation or kick the can further down the road, it gives Janet Yellen and the Fed a window of opportunity to make a move an raise rates. In turn both situations, good or bad may eventually push the U.S. dollar higher and ultimately weigh on U.S. corporate earnings. Here at home today, Fed Governor Jerome Powell will be speaking on monetary policy in a Q&A format at a Wall Street Journal breakfast in Washington, D.C.. Traders will then be digesting the latest Durable Goods data and a couple of housing reports. As of this morning the U.S. dollar and the stock market are slightly higher, with crude oil steady to lower.