Greece parliament passes 25billion programme of tax hikes and spending cuts

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The Greek parliament approved a £25billion programme of tax rises and spending cuts yesterday by 155 votes to 138 that will allow a new £10.7billion European Union-IMF bail-out to save the country from defaulting.

The markets seemed content to worry about the debt in the future and not whether the postponement will actually work. It might actually be years before Greece is called to account and a whole number of things could happen between now and then. You never know, the whole scheme might even work.

Of more immediate motivation to investors is the Euro interest rate increase that is almost sure to take place next week. It seems investors believe that nothing will deter the European Central Bank from raising the interest rate from 1.25% to 1.50% next Thursday and because of this, they are buying the Euro in favour of Sterling because the UK interest rates are going to be stuck at 0.5% for the foreseeable future.

Overall, there was a collective sigh of relief following the Greek vote as a premature Greek default would be a bad thing for everyone, leading to slower, possibly negative, global growth. The relief lessened the need for the safe-haven US Dollar and Swiss Franc which brought up the rear in currency terms. Sterling was fairly steady, gaining a cent against the US Dollar but losing a cent against the Canadian and Australian Dollars.

The Canadian Dollar got a hand from CPI figures that showed inflation had accelerated to 3.7% in May, ahead of expectations of 3.3% and increasing the possibility that the Bank of Canada will raise interest rates. In the US, pending home sales reported a strong 8.2% monthly rise but did nothing for the US Dollar.

The overnight announcement that UK consumer confidence fell from -21 to -25 had no impact on Sterling while Nationwide's house price index was steady in June and the annual decline eased from -1.2% to -1.1%.

Today’s data calendar features Eurozone inflation but it will not alter the ECB's interest rate decision next week. The Bank of England's credit conditions report will not send UK rates higher; in the US weekly jobless claims and the Chicago purchasing managers' index are out.