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Daily Briefing: Greek relief; soft Brexit hopes

LONDON (Reuters) - Euro zone finance ministers meet in Luxembourg today to discuss Greece's bailout programme with the most immediate question being the unblocking of new loans vital to prevent Athens from defaulting on its existing debts due in July.

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While the mood music on that has been positive ahead of the talks (with even Germany signalling a deal is likely) the deeper question of whether Greece will get the broader debt relief it says it needs to get back on its feet is still open. IMF chief Christine Lagarde will be at the talks, a sign that some kind of provisional deal might be possible - but nothing is in the bag.

Underlining the local pressure on PM Alexis Tsipras, pensioners are due to take to the street in further protests at pension cuts that have sunk them into poverty, while a Facebook-based “Resign Now” movement against his government gathers speed.

With Britain still in limbo both on the shape of its next government and its stance going into Brexit talks next week, the Bank of England is set to signal once again today that it is in no hurry to raise interest rates from their all-time low - all the more so given increasing signs that the economy is heading for the doldrums.

BoE chief Mark Carney will deliver his regular Mansion House speech tonight but just as much attention will focus on that of finance minister Philip Hammond. After surviving a government reshuffle, Hammond is now seen by soft Brexiteers as their best hope of forcing PM Theresa May to tone down her position on Brexit and acknowledge the need to put the economy first.

In the current climate, Russian President Vladimir Putin's marathon Q&A session with voters today is almost light relief. It is a regular spectacle whose format Putin has fully mastered, allowing him to project all the confidence and generosity to be expected of a good tsar. All the more useful to him given the widespread anti-Putin protests ahead of next year's elections.


The biggest market jolt on Wednesday came not from the Federal Reserve’s second interest rate rise of the year, but from earlier news of weakening and sub-forecast U.S. inflation and retail numbers for May that cast doubt whether the Fed will pull the trigger again this year as it’s still indicating.

Ten-year U.S. Treasury yields dive more than 10 basis points to just above 2.10 percent, their lowest in seven months, before steadying overnight just under 2.14 percent as Fed refused to flinch at the latest data and continued to signal at least one more rate rise before yearend and the start of its process of reducing more than $4 trillion in stockpiling bonds on its balance sheet.

On the other hand, the Fed’s insistence on seeing through the latest inflation numbers helped the dollar index bounce back sharply from 7-month lows, with euro/dollar failing to get above $1.13 and trading back close to $1.12 this morning, roughly where it was 24 hours ago.

Wall St polls show investors think September’s Fed meeting will all be about the balance sheet before one more hike in December, although futures markets now put the chances of the latter at less than 50 percent. Supporting those doubts are the ongoing relapse in world energy prices, where Brent crude is on the slide yet again and has fallen back below $47 for the first time in a month.

Added to the mounting doubts about ‘reflation’ and the prospects of a U.S. fiscal stimulus were reports U.S. special counsel Mueller, who’s investigating alleged Russian interference into last year’s presidential election, was now investigating U.S. President Trump as part of that probe.

Wall St stocks only ended marginally lower overnight, with Asia bourses slightly in the red earlier and European stocks set to open down too.

Elsewhere, the focus will be back on UK, where the Bank of England is expected to leave policy unchanged and signal a relatively neutral stance but speculation is rife that British finance minister Hammond’s annual Mansion House speech later will indicate a greater willingness of the government to negotiate some sort of deal with the European Union on trade in the Brexit negotiations about to start this month.

Bamboozled by the dollar’s swings over the past 24 hours, sterling is lower in early trading. Eyes will also be on the euro group meeting on the Greek debt package.

Editing by Toby Chopra