The strong upside momentum for the US dollar seen last week is carrying into today’s activity. It was firm in the holiday-thinned trading yesterday but has jumped higher today. There are two chief drivers. Â
First, comments by several Fed officials, including Yellen and Fischer, reiterating that the weakness in Q1 was likely transitory, and stronger growth will allow for a rate hike later this year. Fischer, who will speak on the global economy later today, framed the rate hike issue as “early and gradual or late and steep.” It seems clear from numerous speeches that at least the Fed’s leadership prefers the former over the latter. Â
Second, Greece’s payment to the IMF next week is in question.  Of course, this is not the first time the Syriza government has suggested it would not make a debt payment, which it later made. However, given the large payments do next month, and the fact that the last payment was made by tapping an emergency fund at the IMF itself, there is a sense that the long elusive brink is near. Â
That said, there is a maneuver by which Greece could bundle the various payments to the IMF into one payment and buy a little time, but it needs to formally request permission from the IMF, and it has not done so, nor would the IMF necessarily accede to this. Prime Minister Tspiras has reportedly called an emergency meeting with the Greek negotiating team. Greek bonds have been crushed, but the stock market is bucking the regional trend and posting minor gains. Â
Most investors and policy makers have little sympathy for the Syriza government. However, it must remembered that the official creditors cut off aid payments to the previous government almost a year ago, which may have helped fuel the election outcome in the first place. It is now fairly well documented that the initial aid packages were not designed to put Greece on a more sound and competitive path as much as to build a firewall to avoid the contagion.  Â
