Game, Set & Match.

14th July 2015

Ian Copelin, Investment Director, my wealth comments “As Novak Djokovic defeated Roger Federer for his third Wimbledon title, Greece finally reached an agreement with the troika over the reforms needed for a third bailout in five years and remain in the euro.

As the choice given to the Greek Prime Minister, Alexi Tsipras was black or white (bankruptcy and Grexit or tough reforms) he capitulated and agreed to the reform demands in an effective economic coup d’etat.

However, the bailout is conditional on Alexis Tsipras passing the reforms in the Greek parliament before Wednesday. Whilst the hard left of his Syriza party do not support these reforms, he can very likely rely on the opposition party to help win the vote. And given his political weight has been severely diminished there is likely to be calls for another election.

With a Grexit avoided it may have strengthened the case for higher UK and US interest rates.

In the UK, the higher minimum wage announced in last week’s budget by George Osborne, could stimulate wage inflation and consequently result in higher interest rates despite continuing austerity.

In the US, whilst a September increase maybe too soon, a rate rise before the year-end is now a distinct possibility, unless weakness in China accelerates (speculation is increasing that China will devalue its currency, which will result in the country effectively exporting deflation).

Consequently, while equity markets rose on the news of the Greek bailout, the euro sold-off.”