Daily Overview of Global Markets & the SEE Region (Wednesday, 10 July, 2019)
WORLD ECONOMIC & MARKET DEVELOPMENTS
GLOBAL MARKETS: All eyes today are on the Fed Chairman who will deliver his semi-annual testimony before the House Financial Services Committee at 16:00 CET, as investors anxiously wait to hear whether Chair Jerome Powell will confirm or refute expectations for policy easing at the upcoming 30-31 July FOMC meeting. Meanwhile, according to US money market forwards, the odds of a 50bps rate cut at the July meeting have shrunk from around 25% before the release of last Friday’s strong US June non-farm payrolls to almost zero. Yet, the probability of a 25bps rate cut is still seen close to 100%. Amidst muted trading activity ahead of the Fed Chair’s testimony and the release of the minutes from the June FOMC meeting later in the day, yields of USTs and core EGBs were somewhat higher in early European trade. In FX markets, the USD retained a firm tone, preserving most of its post-payrolls gains.
GREECE: The new cabinet will convene for the first time this morning and will reportedly set the priorities for each Ministry and the Key Performance Indicators against which the performance of each cabinet member will be assessed in the first six months of the administration. Among the priorities of the new government will reportedly be addressing the dire financial situation of the Public Power Corporation, introducing medium-term changes in the tax policy, issuing outstanding pensions and facilitating the progress in the privatisation project of Hellinikon.
SOUTH EASTERN EUROPE
BULGARIA: According to the European Council’s 2019 country-specific recommendations which were released yesterday, Bulgaria will be able to comply with the provisions of the 2019-2020 Stability and Growth Pact and is projected to fulfil its Convergence Programme targets. Regarding Bulgaria’s application for joining the ERM-II, the entry will be postponed until October at the earliest and a final conclusion on Bulgaria’s progress cannot be reached before the ECB publishes the results from the Assets Quality Review (AQR) on Bulgaria’s banking sector.
SERBIA: According to recent statements by the Minister of Finance, Mr. Sinisa Mali, the Ministry of Finance is working on the 2020 draft budget, which envisages increased public investments in road and railway infrastructure.
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