Greece Survives Confidence Vote
Greeces Socialist government survived a crucial confidence vote, paving the way for the latest round of aid and confirming market suspicions. The euro and stocks rallied strongly in anticipation of a positive vote but the initial post-vote reaction was to sell EUR. The remainder of the Asia-Pacific session is quiet.
Greek politicians voted along party lines with all 155 members of the government supporting more than the 151 needed. The market appeared to buy the rumour and sell the fact as EUR/USD fell 40 pips after the results were announced. The market sniffed out the positive vote ahead of time, sending EUR/USD up more than 100 pips to a high of 1.4433. The stock market also benefited with the S&P 500 rallying 1.3% to 1295.
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Greece appears to be on its way to receiving the next tranche of international aid but risks remain. Next week Greece votes on a five-year austerity package and there will be another confidence vote before July 4. Looking out in the long term, IMF leader Lipsky said the situation is exceedingly difficult but has a reasonable chance of success if fully implemented. Thats not exactly a ringing endorsement. The market will also be watching for any escalation in street protests.
The bulk of trading on Tuesday was related to Greece but US housing also had an impact. Existing home sales fell 3.8% to 4.81 million, fractionally better than the 4.80 million expected. The Fed began its two-day meeting with no change in rates expected on Wednesday.
Wednesdays Asia-Pacific session features second-tier data on New Zealands current account and credit card spending. There are key reports until 0830 GMT and the Bank of Englands MPC minutes.
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