Coming Week Market Movers: Greek Budget Package, Debt Deal

Includes: DIA, QQQ, SPY
by: Cliff Wachtel

Part 2: Coming Week Market Movers

Greek Dramas

EU debt crisis developments, particularly those surrounding the latest Greek rescue, including:

1. By the end of Monday, we should know if both of the following were concluded as scheduled:

  • Greek parliamentary approval of the additional €325 million in budget cuts needed in order to get the next installment of the second EU/IMF bailout package. Passage is likely but not assured, given that Greek junior coalition members were already refusing to pass further austerity measures, that at last count, 5 cabinet ministers had resigned, and that Athens was again the scene of violent unrest and strikes last week in response the EU’s latest demands.
  • The Greek -private sector investors (PSI) debt swap deal to reduce the overall amount of Greek debt. Markets continue to assume there will be a deal, but once again, details remain unknown about the extent of PSI participation, which is central to determining whether the debt swap is a “credit event” that triggers credit default swap (CDS) payouts. S&P indicated on Friday that any Greek imposition of a retroactive “collective action clause” that binds all bondholders to the majority’s approval of this agreement would be deemed a “selective default.”

2. Wednesday will see the EU finance ministers meet to approve the Greek budget package, and we can no longer expect them to simply rubber stamp whatever the Greeks present, leaving risk in limbo until mid-week at least.

See Part 1 on the prior week’s events for details on our take on the likely outcome and ramifications for the EURUSD and other risk assets.

Top Calendar Events

This week’s economic calendar is a typical relatively light mid-month affair. Highlights include:

  • Monday: AUD – home loans
  • Tuesday: JPY: BoJ – rate statement & press conference, EUR – German ZEW survey, GBP – CPI, BoE inflation letter, USD – core retail sales
  • Wednesday: GBP – BoE inflation report, USD – TIC long term purchases, Empire state mfg index, FOMC meeting minutes
  • Thursday: AUD – jobs reports, USD PPI, weekly first time jobless claims, Bernanke speaks, Philly Fed Mfg index

Consult any good economic calendar for details, or for its detailed look at the coming week’s calendar.

Disclosure/disclaimer: No positions. The above is for informational purposes only. All trade decisions are solely the responsibility of the reader.