Greece hands over EUR 750m to IMF

Greece has initiated the transfer of €750m of debt interest to the IMF this morning, as Eurozone finance ministers in Brussels to continue negotiations around the final tranche of Greece’s bailout funds.

Regular readers will know that the Greek government faces a crunch few weeks, with around €2.5bn of salaries and pensions due at the end of May and another €1.5bn of interest due to the IMF in June.

The Euro is of course very responsive to the ongoing situation and we may see the single currency get more expensive if Athens continues to meet its obligations or manages to negotiate a new deal (without risking the wrath of its voters) before the end of June, when its bailout deal will otherwise end. The Euro has indeed strengthened overnight, with GBP-EUR dropping over a cent in Asian trading hours.

It seems increasingly likely that we could see a Greek referendum on any negotiated deal, which would effectively be in a vote on whether to leave the Eurozone; the effects on the single currency in this case would be a complete unknown but would be likely to cause extreme volatility.

David Cameron appoints Cabinet

At home, David Cameron has appointed most of his new Cabinet, and talk is already turning to the promised UK referendum on EU membership. The uncertainty which will inevitably surround the referendum is very likely to hurt the Pound, although arguments can be made in either direction after that, and one ex-minister, David Davies, said he thought the referendum could even happen in 2016 rather than 2017.

Sterling continues to enjoy post-election rally

The Pound meanwhile continued to enjoy a positive run yesterday, after the resounding and unexpected clear election result last week. Sterling finished at its best level against the Euro in 2 weeks, and against the US Dollar since February. The good news for those of you sending money abroad won’t continue for ever though, and once the business of the new Parliament gets underway we will see if markets settle back down.

Today we have the Australian budget report at 10.30am, the unofficial GDP estimate for the UK at 3pm, and reports from the US Federal Reserve and Reserve Bank of New Zealand this evening. Tomorrow sees a whole raft of European data, as well as the quarterly Bank of England inflation report.