Last week markets were thinking an agreement was edging nearer between Greece and its creditors (ECB/IMF/European Commission). Weekend developments have pretty much scuppered any hope of talks reaching an amicable conclusion. I’d say chances of a ‘Grexit’ are now around 85-90%.
Greek Prime Minister Tsipras asked for a one month extension and this was shot down immediately. Tsipras has a called a referendum to give the Greek people a vote on austerity/remaining in the Euro/EU on July 5th. There is a repayment due to the IMF tomorrow for €1.5 billion. Chances of that being paid? About as likely as Elvis turning up to your summer work drinks.
Capital controls are now in place with Greek Banks shut until July 6th (day after the referendum). They have set a 60 Euro minimum daily withdrawal limit with no funds allowed to leave the country. The Greek Stock Market didn’t open this morning and European stocks and Greek Bonds tumbled. Add all this together and it doesn’t take a genius to work out that we’re close to stepping into the unknown. We will update you on further developments this week as the landscape will change dramatically on a daily basis.
If you do have requirements this week I’d urge you to get in touch with myself or one of the trading team as there will be a lot of movement this week.
What has this done to GBP/EUR? GBP/EUR shot up overnight to 1.43. Needless to say this was Euro weakness. If you are a Euro buyer please do get in touch and implement market orders. There may well be some wild movements this week. Some are calling 1.45 with others suggesting 1.50 may occur later this week. I would say that is slightly overboard although with the current situation anything is possible.
If you can achieve over 1.40 on SPOT I’d suggest if you have a requirement this week covering off some of your exposure on SPOT may be a good idea. Please contact myself or one of the trading team to discuss. Everyone wants higher but if you can achieve 1.40 or slightly above I’d argue that historically you’re at the top of the market.
We went through 1.10 the figure last night on weekend developments. We’ve recovered slightly and pushed back up 100 pips or so to challenge 1.11 on the back of some comments suggesting a suitable conclusion can be reached in time. I doubt that very much. I would expect EUR/USD to push lower in the coming weeks and I’d suggest we’ll challenge 1.07 with 1.05 a medium term target.
Very much on the periphery this week. We do have the NFP (Non-Farm payroll) figure released on Thursday (Friday is 4th July and a US holiday) so that will provide some volatility for Cable. I expect GBP/USD to start drifting back towards 1.55. If you are USD buyer and priced in at 1.55 look to cover off some of your exposure prior to Thursday. We also have ISM Manufacturing data out of the US on Wednesday so this will add to some movement on Cable this week. Please contact myself or one of the team to discuss levels to aim for and execute.
There is evidently a number of moving parts on the Greek situation and we will update you as and when we have more clarity. This may prove to be the most volatile week for some time in the currency markets so if you have any requirements please do get in touch and we’ll put a strategy in place.
If you have any questions please do not hesitate to get in touch.
Written by Liam Alexander