FOMC Meeting Minutes in focus, but Fed Williams speech keenly eyed

Market Movers

• The continued drop in Chinese stocks now adds to negative risk sentiment globally and will be the major focus in financial markets in addition to Greece. Regarding Greece, Eurogroup finance ministers have scheduled a conference call this morning. Greek prime minister Tsipras will address the European parliament at 9:30 CET and ECB’s Coeure is also scheduled to speak. However, probably no major new developments until Greece submits a revised economic programme.

• In the US minutes from the 16-17 June meeting will be released this evening. However, it will probably more interesting to hear what Fed’s Williams has to say about the possible impact from the recent uncertainty about US monetary policy in his speech this evening.

Selected Market News

• The euro-area leaders yesterday set Sunday as a final deadline for reaching an agreement with Greece on a third bail-out programme. There will be an extraordinary EU leaders summit on Sunday and Greece now has until Thursday to deliver a new economic programme after it failed to deliver an economic programme with major changes. The euro-area leaders are trying to sell the Sunday deadline as a final ‘hard’ deadline where an ‘in’ our ‘out’ decision will have to be made. According to press reports ECB president Draghi at the meeting indicated that Greek banks could only survive until the end of the week and that the ECB’s emergency loans to Greece cannot be extended beyond the weekend.

• It has been announced that the Iran nuclear talks between the P5+1 major powers and Iran will be extended until Friday to reach a final deal.

Markets Today

• Chinese stocks continued to drop this morning and there is now substantial spill over to financial markets globally. Yesterday it was particularly evident in commodity prices, today it has been the main driver for risk-off sentiment across the board. The Shanghai composite and Hong Kong’s Hang Seng are down 3.9% and 4.2%, respectively. Asian stock markets lower across the board.

• In the FX market particularly commodity currencies like the AUD, NZD and CAD have weakened overnight and emerging market currencies are weaker across the board. Safe-haven currencies like JPY are benefitting. The oil price has only declined slightly and EUR/NOK is largely unchanged. EUR/NOK has risen sharply in recent days driven by the collapse in the oil price. Given the poor liquidity in the NOK and the fact that the spike higher has sent EUR/NOK into uncharted territory, it is difficult to call the topside in EUR/NOK in a risk-off environment and the risk is to the upside.