FXStreet (Bali) – The TDS Team analyzes the aftermath of the Greek referendum decision, noting that all roads should lead to a lower euro at this stage.
Key Quotes
“Whatever the result of the Greek referendum, the best case scenario is that we see some stability in Greece by the end of July. Even as we have seen our base case of referendum and capital controls pan out, we still caution against those that expect a ‘Yes’ vote to be clearly positive. This situation will not clear up any time soon.”
“Our biggest concern is that even with a ‘Yes’ vote, the creditors will now need to ask for even more strict measures in order to stabilize the economy. Syriza may then focus on the letter of the law—an approval of a referendum of measures which expire this Tuesday–which then lets Syriza spin this as creditors once again backtracking on demands.”
“And while the ECB and IMF cannot ask for it given their apolitical status, European leaders are very likely to ask for a national unity government to implement the program, which means Syriza will still be in the driver’s seat. If they do not give in, again trying to spin it as foreigners ignoring Greek democracy, we can see a protracted stalemate as liquidity degenerates.
“For markets, the focus should be on the Greek polls and Eurozone peripherals to discern the next stage of the response.”
“All roads should lead to a lower euro at this stage. The more the polls conducted after the referendum was announced suggest support for accepting the bailout, the more the downside in risk and EUR can be limited, though relief rallies are doubtful with large implementation uncertainties remaining even if we have an affirmative electoral outcome.
“The more peripheral debt comes under stress, the more the ECB is likely to announce a further front-loading of QE into July and August, which were meant to see lighter buying, on the basis of the macroeconomic implications of uncertainty. Broader funding stress can see new EUR and USD liquidity tenders announced in order to address potential needs or serve as signalling effects.”
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