From Tsipras' Proposal to Yellen's Bar

This afternoon's speech by Fed Chair Yellen at 12:30 Eastern (16:30 GMT/17:30 BST) is expected to reveal her reiteration the message that more will be needed from jobs and inflation before rates lift-off, especially 48 hours before another emergency EU/Greece summit. Yellen's take on the China and Greece issues will undoubtedly be highlighted as to be taken into consideration by the Federal Reserve. Yellen will be asked more on these global issues on Wednesday's semi-annual testimony to Congress (a crucial hour, coinciding with the Bank of Canada decision).

Wednesday's release of the Fed minutes from the June meeting highlighted a warning by a number of FOMC members to avoid premature tightening, while broadening their mention of Greece risks and the market fallout (not economic) onto global risk appetite. More importantly, the Fed faces an increasingly high bar for rates liftoff, underlined by three conditions: i) prolonged strength in GDP growth (this was revised down at June FOMC); ii) persistent improvement in labour markets (participation rate fell to fresh record low, average hourly earnings came up short); iii) inflation must continue trending upwards towards 2.0% target (core PCE fell to 1.24% in May from 1.29% and 1.35% in April and March respectively).

And Back to Tsipras

Greece finally delivered a post-referendum proposal, seeking a 3-year loan under ESM funding worth EUR 53.5 bn, including small pension reforms and higher corporate taxes, including the sale of regional airports. Initial reports stated the proposal is similar to that of the EU proposal from June 26, but the main difference is that the EU demands did not include debt-relief. Greek hardliners are likely to back Tsipras' proposal today. The ESM board will also vote for it today.