WORLD ECONOMIC & MARKET DEVELOPMENTS
GLOBAL MARKETS: The ECB kept its key interest rates and the monthly pace of asset purchases unchanged at Thursday’s monetary policy meeting, as was widely expected. In the press conference that followed, President Mario Draghi adopted a generally dovish tone with the main exception being a relaxed view about the recent tightening of financial conditions in the euro area after his speech in Sintra on June 27th. With Mario Draghi appearing not to be particularly concerned about the EUR’s recent appreciation, the common currency extended recent gains hitting a two-year peak of 1.1677 against USD earlier today. Elsewhere, German Bund yields moved lower in view of the ECB President’s dovish tone on tapering and inflation. EMU sovereign bonds were also firmer outperforming Bunds.
GREECE: The Executive Board of the IMF approved in principle a €1.6 billion Stand-By Arrangement for Greece which will become effective once there have been specific and credible assurances from Greece’s European partners to ensure debt sustainability and provided that Greece’s economic programme remains on track. The new financial arrangement will be activated upon another decision of the Executive Board once the necessary requirements are in place and its duration will be until 21 August 2018, a few weeks after the expiration of the ESM programme. The IMF revised downward its forecast for GDP growth from 2.2% (WEO, April 2017) to 2.1% for 2017 and from 2.7% (WEO, April 2017) to 2.6% for 2018.
SOUTH EASTERN EUROPE
CESEE MARKETS: Emerging market stocks gained ground earlier on Friday against a weaker US dollar and rather dovish comments by ECB President Draghi at yesterday’s monetary policy meeting.
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