Morning MoneyBeat Europe: Greece to Headline Draghi's Presser

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Good morning Europe,

News that Greece's creditors had agreed--among themselves at least--the terms of a deal to present to the beleaguered country's government sent a flurry of excitement rippling through Europe's markets on Tuesday. The euro, further supported by data showing eurozone inflation was stronger than expected in May, surged 2.5% on the day against the dollar and gained ground against other currencies.

Not to be outdone, Greek Prime Minister Alexis Tsipras said his government submitted its own proposal to the trio of international bodies behind the country's rescue program. What isn't clear is whether the two sides have given enough ground to negotiate an agreement. What is, is that Greece has a €300 million payment to make to the International Monetary Fund on Friday. Greece is likely to need further funding to make the payment and that funding hinges on a deal being struck with its creditors.

Undoubtedly, Greece will headline European Central Bank President Mario Draghi's news conference following the central bank's latest governing council meeting on Wednesday.

For all the worries about Greece, the ECB's policy makers will take comfort from the fact that they have managed to kill the deflationary threat for now--eurozone inflation ticked up to a 0.3% year-on-year rate in May from flat a month earlier, while prices excluding volatile food and energy rose 0.9%. They'll be further cheered by recent survey evidence suggesting relatively solid first-quarter growth is being sustained and by news that Spanish jobless claims are tumbling fast. However positive, the economic news won’t be good enough to make the ECB end its bond-purchase program early.

The good economic news comes with a price--further selling of eurozone bonds. Yields on Italian and Spanish 10-year government paper pushed above 2% while German yields were also sharply higher. Indeed, the eurozone debt market led a general rout of sovereign debt.

Market Snapshot: U.S. markets (Tuesday close) DJIA down 0.16%, Nasdaq down 0.13%, S&P 500 down 0.10%. Nikkei (Wednesday close) down 0.3%. Brent crude down 0.53% at $65.14. Gold down 0.18% at $1192.30. EUR/USD at $1.1157, USD/JPY at ¥123.98. 10 year Treasury yields 2.27%, Bund 0.69%, Gilt 1.99%.

Watch For: Eurozone final May services PMI data, EU April retail sales, EU April unemployment rate, ECB rate-setting meeting, U.S. May ADP employment, U.S. May ISM non-manufacturing.

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