Week in review: Chances of a deal between Greece and the EU faded further over the week-end, raising the probability that Greece will not be able to meet its IMF payments in May. According to the FT, the main issue of contention is one of process as Finance Minister Varoufakis refuses negotiations with mid-level technicians, rather than at the highest political level, which is deemed undo-able by its peers. European countries are currently attempting to engage Prime Minister Tsipras in the negotiations to break the impasse. Meanwhile, there are reports that Greek local authorities are refusing to transfer the cash to the Central Government, for fear that if Greece defaults they will never recover it.
Datawise, the Euro area composite PMI edged down to 53.5 after 54 in March. The indicator continues to point to growth ahead, albeit at a somewhat slower pace. In Germany, the widely watched Ifo rose again in April to 108.6, signalling that the German recovery remains strong.
Week ahead: Important week for monetary policy as Federal reserve meets. Though the minutes will be released only in a few weeks, the initial statement and FOMC members speeches in the following days may provide guidance as to the current state of affairs. Fed’s Chairwoman Janet Yellen is reportedly uncomfortable raising rates if core inflation and wages weaken, though there are no signs of that happening for now. In terms of data, US Q1 GDP growth should decline due to weather-related effects, confidence indicators for the euro area will be released this week.
- Tuesday 28: Federal Reserve meeting starts (ends on the 29th)
- Wednesday 29:
- EU Commission sentiment indicators (ESI): markets expect a stabilisation at levels consistent with moderate growth
- US Q1 GDP: markets anticipate 1% annualised growth after 2.2% in Q4