Daily Economic Outlook: 6th July, 2015

The Greece saga took another twist yesterday with almost two-thirds of Greek voters overwhelmingly rejecting the latest bailout deal put forward by its creditors. The focus is now expected to shift rapidly to the response of its creditors - especially Germany and the ECB. While the Greek government is expected to use the 'no' vote as an opportunity to extract a better deal, the terms on which the creditors would be prepared to re-enter negotiations remains unclear. A meeting between German Chancellor Merkel and France PM Hollande is scheduled for this afternoon, with a wider meeting of euro area officials set to take place tomorrow. 

Just as important will be the actions of the ECB. The decision by the ECB last week to freeze the amount of emergency liquidity assistance (ELA) provided to the country's banks, led to capital controls being introduced. While banks remain closed and ATM withdrawals restricted, the absence of an increase in the ELA limit by the ECB's Governing Council today could see more stringent capital controls being implemented, says Lloyds Bank.

With market attention fixated on developments in Greece, the level of attention on the US non-manufacturing ISM is likely to be less than usual. Nevertheless, the release for June should still provide some further insight into the strength of activity in the US. With the US economy expected to post a significant rebound in Q2 GDP growth, particular from the soft Q1, today's release is expected to highlight the strength of the non-manufacturing areas of the US economy. The headline business activity index is forecast to rise to 56.5 in June from 55.7, added Lloyds Bank.