FXStreet (Barcelona) – The Research Team at Deutsche Bank, share the key developments and risks ahead for the Greek crisis, and further add that markets are pricing in a strong probability of a new agreement or else a limited contagion.
Key Quotes
“The range and probability of unpredictable outcomes in the Greek crisis has again materially increased over the past weekend following the “No” vote on the referendum. A new round of negotiations is expected to formally start, but as DB’s George Saravelos points out, credibility and trust between Europe and Greece has been seriously damaged.”
“A Euro leaders’ summit is scheduled for today. The entire process will essentially be in the same place it was left two weeks’ ago, the only difference being the massive pressure on the Greek economy caused by capital controls.”
“Meanwhile, the ECB has announced it will keep the Greek bank ELA ceiling unchanged at last week’s level, but it has also increased haircuts on Greek bank ELA collateral. It is impossible to know the exact impact because the haircut amounts are not disclosed – the ECB is likely to wait for the outcome of the summit before taking more aggressive steps.”
“Market reactions yesterday on the back of referendum were rather muted, even more so than a week ago, when Greece first announced a referendum. Clearly, markets are pricing a fairly strong possibility of a new agreement, or else limited contagion and offsetting central bank actions (more QE by ECB and delay of liftoff by Fed), but we wonder if there is enough risk premium now for the heightening uncertainty.”
(Market News Provided by FXstreet)