FXStreet (Barcelona) – Morgan Stanley sticks to their bearish view on the EUR, explaining the possible price action in the single currency from a Greece deal or a Grexit scenario, as noted by eFXnews.
Key Quotes
“Should Greece sign a deal, a short-term EUR rebound should be followed by EUR weakness as investors are likely to move back into EUR-funded carry positions,”
“Should Greece exit, the ECB may have to use its tool kit to keep sovereign spreads under control. Monetary easing should put the EUR under selling pressure. Ultimately, the ECB should be successful in controlling spreads, we believe,”
“A Grexit represents a fundamental shift for EMU with the loss of ‘irrevocability’ potentially turning the union into a club of fixed exchanges rates with the possibility to leave. Peripheral assets will have to trade at a risk premium, unless EMU authorities deepen integration via further banking union and fiscal integration steps. The ECB controlling sovereign spreads successfully could turn into a long-term EUR negative factor as it may not provide the necessary ‘wake-up call’ to European politicians to make the necessary reforms to avoid future market tension”
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