Oil prices rallied to the highest level in 2 weeks yesterday as US crude stockpile declined more than expected and the Greek parliament approved the austerity package of 78B euro, with 155 out of 300 lawmakers voting in favor of it. The parliament will vote again on bill details later today. It's likely to be passed again. The front-month contract for WTI crude oil price rose as high as 95.84 before closing at 94.77, up + 2.02%. The equivalent Brent crude contract surged for a third consecutive day to settle at 112.4, up +3.33%. Market sentiment was bullish with equities, commodities and high-yield currencies advancing. Gains were, however, tampered after both the S&P and the IMF warned of US default.

While Greece will likely be granted funding from the EU/IMF and avoid immediate default, rating agencies warned that US debts may be downgraded. S&P said that it will downgrade US Treasury bills to D rating if the government misses a payment of $30B on August 4, when the bills mature. Indeed, Fitch Rating and Moody's said earlier this month they would downgrade the country's rating should the raise of debt ceiling fail.

Meanwhile, the IMF warned the US to raise the debt ceiling or it would risk causing a ‘severe shock' the world economy. At the annual report on US economy, the world lender said ‘the federal debt ceiling should be raised expeditiously to avoid a severe shock to the economy and world financial markets...These risks would have significant global repercussions, given the central role of US Treasury bonds in world financial markets'.

On the dataflow, Eurozone's inflation probably rose to +2.8% y/y in June from +2.7% in the prior. At the June meeting, the ECB pledged to have 'strong vigilance' on price stability. Together with heightening inflation pressure, a rate hike is imminent at next week's meeting. In the US, initial jobless claims probably fell -9K to 420K in the week ended June 25. The Chicago PMI index is expected to have slipped to 54 in June from 56.6 a month ago.