All eyes will stay on Greece in the coming week with the first June payment to the IMF (c.€300mn) due on Friday. Recent headlines have been somewhat conflicting, with sources (The Guardian) suggesting that the IMF offered Greece a delay to pay the EUR1.6bn it owes in June, with the possibility to make all payments at once at the end of the month. Other than Greek political developments, the highlight will likely be Wednesday’s ECB policy meeting and subsequent press conference. In the context of mandate-inconsistent levels of current inflation and inflation expectations, the ECB is expected to reiterate its commitment to its PSPP purchases. Barclays notes:
- We think the market may have misinterpreted the ECB’s recent statement regarding the frontloading of its asset purchases.
- We expect President Draghi to clarify this during the press conference, noting that the decision was made on the basis of seasonal liquidity considerations rather than the recent increase in bond yields. While this may provide upside pressure to the EUR, any strength is unlikely to persist, and we recommend selling EURUSD on any upticks.
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