All eyes are on Janet Yellen’s speech. Futures are in a waiting pattern, the Dollar is giving back some of its gains over the past few days and news is filled with what might be said. While this moment is going to have a significant play in the markets new found rate rise expectations for June, it is masking the longer dated but more significant events.
The talks in Greece about debt relief are old hat compared to the second rate hike in a decade for the US, but this time could be different in the nature of the bailout terms. In the past the unity of the troika would pit against Greece and come to the conclusion to kick the can down the road. This time one of the members of the troika, the IMF, is making demands for debt relief which Germany doesn’t want to look at (at least not until after 2018 elections).
This will work until the fall when the issue of debt relief will be brought up again by the IMF which is looking to have Greece’s debt ‘sustainable’ to continue to participate in the bailout. The exclusion of the IMF may not seem like a big issue but it will put more of the power into the hands of finance ministers like in Germany and add more of the fracturing political situation in Europe to the bailout talks. Without the IMF you could expect to see these debt negotiation that go to the brink before being resolved become a lot less certain.