FXStreet (Barcelona) – With the crucial Greece referendum voting ahead, coming Monday will witness volatile moves in the euro, explains Derek Halpenny, European Head of GMR at Bank of Tokyo-Mitsubishi UFJ.
Key Quotes
“The “Will it be a Yes or a No?” question is keeping market activity subdued ahead of the referendum in Greece on Sunday. The binary outcome to this vote was highlighted by a Bloomberg poll just conducted which revealed a split down the middle with 43% planning to vote “No” and 42.5% planning to vote “Yes”. That left a relatively small total of 14.5% undecided which is surprising given the speed in which this vote was called.”
“Worryingly for the “Yes” camp is the 81% of voters who want to stay in the euro. This shows that Syriza is winning the argument that “No” on Sunday doesn’t mean “No” to the euro. The tactic from Europe and the “Yes” campaign to instil fear into Greek voters doesn’t appear to be working and may indeed back-fire. No doubt the Syriza argument will be helped by the IMF concluding yesterday that debt levels in Greece are unsustainable.”
“With the vote so close to call, we should of course expect a big EUR/USD move on Monday. However, a “Yes” victory that lifts the euro may not last long. This whole affair has been certainly negative for the Greek economy but will also probably impact sentiment across the continent and a downturn in broader economic data is likely which will perhaps reinforce the need for continued ECB easing.”
“Similarly, while a “No” victory will send the euro lower, it probably means renegotiation and we guess the EU’s bluff about “Grexit” will be found out. Hence, any collapse in EUR/USD on Monday may not be sustained either.”
(Market News Provided by FXstreet)