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Greece off the scores but still a never-ending story – BBH

FXStreet (Delhi) – Research Team at BBH, note that as a lightening rod for the global capital markets, Greece has surrendered and its role being taken up by China rough transition or the Fed's continued reluctance to hike rates six years since the recession ended and despite the achieving of unemployment levels rarely seen.

Key Quotes

“However, the Greek project is far from complete. Greece still has to approve and implement far-ranging reforms, and commit to new austerity measures in order to free up funds and recapitalize the banks. Every time Prime Minister Tspiras submits a new reform bill, the political fabric frays.”

“The package of reforms are part of the "prior actions" agreed upon with the EU and IMF and are required for the disbursement of another 2 bln euros of aid. Many of the measures had been rejected or diluted by Syriza or prior governments.”

“While Greece is servicing its official debt via the new loans, it is still stiffing the suppliers of goods and services to the government. The latest figures cover August. The general government was in arrears by 5.9 bln euros, up about 170 mln euros on the month. This includes about 800 mln euros of unpaid tax rebates.”

“Greece still cannot get any breaks. The ECB reportedly is considering requiring Greek banks to have greater regulatory capital to pass the upcoming stress tests. Last year it required Greek banks to have 8% Tier 1 capital and 5.5% under adverse conditions. It has not been decided yet, but reports suggest that it could be 9.5% and 8.0% respectively.”

“The reform package and next month's are needed to free up funds for the bank recapitalizations that are still anticipated to be complete by the end of the year.”

“Greece's 10-year bond yield has fallen below 8% this month. This is the lowest level since last December. While there may be scope for further declines, the bulk of the move is past.”

“We were one of the few that did not expect Greece to leave EMU, but we recognize the situation as terribly fragile. The political stresses caused by the economic demands were anticipated, and we fear that the worst still lies ahead.”

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