The fickle market – Greece is forgotten, now it’s back to monetary policy divergence

•     The fickle market – Greece is forgotten, now it’s back to monetary policy divergence

–    Resolution (for now) of Greek problem is helping European stocks & peripheral bonds, but not EUR as US and European monetary policy differences come into focus

–    Yellen reiterates that Fed wants to tighten, while Draghi repeats he’s willing to do whatever necessary if inflation falls again. Fed funds rate expectations rise.

•     GBP also benefitting

–    Carney notes BoE wants to raise rates within 3 years; who else is saying this?

•     Commodity currencies to suffer

–    Weak demand from China = weak economic activity = weak inflation = lower interest rates, weak currencies

–    Oil prices now back to March levels as Iran starts to come back on stream

•     Draghi increases ELA, suggests Greece may be included in QE

•     Today:

–    Eurozone: No major indicators. Germany votes on Greek bailout

–    Canada:  CPI for June

–    US: CPI for June. Both headline & core CPI expected to accelerate = USD-positive. Preliminary U of M consumer sentiment for July. Housing starts & building permits for June: starts expected to be higher, permits lower = mixed. 

Speakers:  Fed Vice Chairman Fischer