Market sentiment remained weak as the Greek situation worsened and the ECB announced that it would suspend lending money to the country's banks. The Fed released a mildly more dovish minutes for the April meeting, indicating further easing cannot be ruled out if the economic situation deteriorates further. US data, however, delivered some pleasant surprise that lent some supports the market financial markets.
It's expected that the Greece caretaker government will announce June 17 as the date for a second Greek election. Head of the New Democracy party Samaras stated that Greek people are faced with two choices in this election...We can change everything in Greece, together with a Europe that is changing. Or we can live through the horror and isolation of a euro exit and the collapse of all that we have built. In Germany, Finance Minister Wolfgang Schaeuble believed there are no easy ways to solve Greece's problems...If Greece wants to stay in the euro-and that's something that we all wish for-then that's the way it has to be. At the same time, in response to the heavy withdrawal of deposits from Greek banks, the ECB announced that it will suspend lending to some of the institutions it does not consider as solvent. The central bank stated that once the recapitalization process is finalized, and we expect this to be finalized soon, the banks will regain access to standard Eurosystem refinancing operations.
The FOMC released the minutes for the April meeting. Policymakers acknowledged improvements in economic growth but these remained insufficient to change its current accommodative policy stance. While there was slight change in language from the previous meeting, it appeared that the central bank turned mildly more dovish. Overall, the Fed continued to pledge that it would do more if the economy deteriorates further.
The BOE yesterday released a dovish quarterly inflation report in May, lowering both inflation and GDP growth forecasts from February projections. Policymakers also cited the worsening situation in the Eurozone would affect the UK's path to recovery and there was a risk of a storm heading our way from the continent. Governor Mervyn King stated that while the central bank does not know when the storm clouds will move away, there are good reasons to believe that growth will recover and inflation will fall back.