Greece‘s next payment of their debt obligation to the International Monetary Fund (IMF) was due on Friday. Despite offers from lenders, Greece has delayed it’s repayment obligation to the IMF. Greece has opted to bundle its payment obligation to delay its due date so that all of the debt payment is due at the end of the June rather than in four instalments.
The IMF have commented that this manoeuvre was ‘unorthodox but permissible.’ This payment option has always been available to previous countries in Greece’s situation however the only country to ever elect this option was Zambia in the 1980s.
Whilst Greece is not yet considered defaulting on the payment, it appears that Greece is delaying the inevitable with this option. Greece was due to make a payment of 300 million Euros on Friday, however with their bundle payment now due at the end June this will come to a total of approximately 1.6 billion Euros.
The Greece finance minister Yanis Varoufakis spoke with Greek media following the announcement and stated that ‘Greece intends to meet all of its debt obligations’, when questioned by the media on when such payments would be made he responded that ‘As finance minister I cannot answer such a question other than to say that the Greek state aims at always repaying all of its beneficiaries.’
It is evident with the current stall by Greece that they are still feeling ‘cautiously optimistic’ of a more suitable resolution in lending options offered by the European Central Bank (ECB). As stated by Greek Economy Minister George Stathakis, ‘the Greek government has a mandate to both stay in the Euro and extract a better deal from Europe’.
The impasse between Greece and its lenders relate to the austerity requirements that would completely contradict the promises made by Prime Minister Alexis Tsipras on election that he would end the ‘grinding austerity’, a change to this election promise looks like the only possible resolution for Greece to receive funding for its debt however will cause significant problems for the Syriza political party.
The result of this decision by Greece to delay their payment till the end of June means that negotiations will continue between Greece, the IMF and the ECB in an attempt to come to a suitable arrangement prior to the end of the month.
The Australian Dollar to Euro Exchange rate will like experience a high amount of volatility during this time and further developments come to hand.
The Australian Dollar to Euro Exchange Rate is currently trading at 0.6820 at 8:00 AM AEST today.
Chinese Trade Balance improves signalling hope for the Australian Dollar
Monday provided a lack of local data out for the Australian Dollar however the currency was impacted by high level data out of one it’s largest and most influential trading partners, China. The Chinese economy is showing a consistent decline in recent times. However its latest release of Trade Balance Figure showed improvement; the figure was a result of 59.5B. The forecast was for a result of 44.9B, with analysts expecting an increase from the previous month at 34.1B.
Today the markets will remain focused on the health of the Chinese economy with the release of Consumer Price Index (CPI) and Producer Price Index (PPI). With CPI showing decline throughout all industrialised economies over recent months it would be expected that China will be consistent with this trend. The forecast for this result is a reduction from 1.5% down to 1.3% however any variation to this figure could cause movement to the Australian Dollar with the state of our economy so heavily dependant on the health of the Chinese economy.
NAB will also release their monthly business confidence survey, providing an early indicator of economic health. The previous months figure was a result of 3.