Most financial media lead with the news that during our Monday evening there was finally an agreement between EU leaders and the Greek government.
The details of the new plan for Greece are harsher than any proposal tabled in past months, and components of the reforms must be passed by the Greek parliament byWednesday.
Away from the political speak of officials it appears obvious that the Greeks have not played this well. Led by the German Finance Minister Schaeuble the guidelines of the agreement will see the Greek government have to get up off the canvas, wipe off the blood and sweat and try to sell to their country the agreement, with terms that could have been less severe if agreed some weeks (months) back.
The official communique states the creditor nations would offer Greece up to €86 bln of three-year funding for tax, pension and labour reforms, more than the nearly €54 billion requested by Athens last week.
There will be no haircuts, but the deal held out the prospect of some amount of debt rescheduling.
The ECB reportedly left ELA funding for the Greek banks unchanged at €89 bln, while the Greeks extended the bank holiday for an indefinite period. Once the Greek parliament has voted for the programme and the proposals are put into law on July 15th, then the ESM bail-out parliamentary process can commence across the Eurozone which will require national parliaments in Finland, Germany, Austria, Netherlands, Slovakia and Estonia to approve starting ESM talks. Once this is done, bridging finance will be made available to Greece to allow it to repay its debt to the ECB which falls due on July 20th.
Markets have reacted with a day of gains across European bourses in response to the news, Wall Street also in the black to start the week.
Currency markets showed little interest in celebrating the news with no lasting favour shown for the EUR, in fact it would appear traders have instead revisited commentary from Fed officials, Yellen (and Mester) of late last week.
Ahead of her semi-annual testimony this week Yellen had appeared happy with the recent performance of the US economy and did not over emphasise any doubts or the risks associated with developments in China or Greece.
The September meeting of the Fed might well still be too soon for a lift in rates but the meetings in October and December do appear live.
UST rates are marginally higher on the day, the 10Y at 2.43%.
The NZD opens this morning shy of the US67cent level, with plenty to see and negotiate in the coming days. Yesterday’s FPI outcome saw our Research team trim their expectations for Thursdays CPI (now at +0.6% Q/Q and +0.4% Y/Y). There will be very few surprised by a soft GDT this week, again our Research team moved yesterday to reduce their expectations for the 2015/16 Dairy Payout (now at $4.70 from $5.20).
Elsewhere today brings us Australian Business Surveys from NAB and the night ahead serves up monthly inflation readings and ZEW surveys from Europe.
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Raiko Shareef is on the BNZ Research team. All its research is available here.