The Daily Update - G7/ Greece/ EU Referendum

Over the weekend the G7 finance ministers met in Japan, with most of the headlines focusing on what seems to be a growing spat between the United States and Japan; the two countries are at loggerheads over currency policy. The US has stated that Japan has no justification to intervene in currency markets to stem the strength of the yen, which is having a detrimental effect on Japanese exporters, however the US insists the move has been orderly.

Jack Lew, the US Treasury Secretary told reporters that "It's important that the G7 has an agreement not only to refrain from competitive devaluations, but to communicate so that we don't surprise each other," adding "It's a pretty high bar to have disorderly currency conditions.” Japanese Finance Minister Taro Aso sees it a different way, saying he told Jack Lew that “one-sided, abrupt, and speculative moves were seen in the FX market recently, and abrupt moves in the currency market are undesirable and the stability of currencies is important.”

Also over the weekend there has been some progress made in Greece on bailout reforms in a move to free-up more bailout money and debt relief. The government has approved a bill which allows some indirect taxes to be increased, frees up the sale of non–performing loans and the setting up of a new privatisation fund. The Hellenic Company for Assets and Participation (EDIS) as it is to be known will be set up later this year and will run for 99 years; 50% of the fund’s revenue will be used to pay off public debt, with the other 50% paying for investments geared towards growth.

Lastly, today is the one month countdown to the UK’s EU referendum. The Financial Times (FT) this morning reported on a UK Treasury “short-term shock” paper, suggesting that growth could be up to 3.6% lower after two years if the UK were to vote to leave the EU. They also suggested house prices would fall by 10% (lower than Osborne’s 18% last week) and there would be a loss of up to 500,000 jobs. The basis for this warning is the assumption that the UK would become less open to trade and investment, which would have a knock on effect on business and household spending. The FT also reports on a poll of polls, which puts the remain vote on 47% and the leave on 40%. If you fancy a flutter, you can get 4/1 for the UK to leave, and to stay, its 1/5!