Foreign Exchange News
30 June 2015

Not Just a Simple Yes or No

EUR/USD 1.1160
GBP/USD 1.5723
GBP/EUR 1.4080 (0.7101)
EUR/CHF 1.0396
GBP/CHF 1.4644
GBP/AUD 2.0484

It is finally here, the June 30th deadline where Greece are due to make a payment of €1.6bn to the IMF. There is very little doubt in my mind that Greece will not be settling this debt as their banks have really started to count their pennies. Today there are fresh rumours that the ATM withdrawal limit may now be lowered from €60 to €20. Tspiras also reconfirmed the dire state of their banks liquidity and shared his thoughts on Greece making today’s repayment “How can we pay the IMF, when our banks have been all but suffocated out of existence?” It is important to note however if a non-payment were to happen today, then Greece would simply be in arrears, not default, which should see liquidity assistance from the ECB continue. The deadline for payment to the IMF is 11 o’clock tonight GMT.

We now turn our attention to the Greek referendum which is scheduled for July 5th where the people will be asked to vote Yes or No to the austerity measures put forward by its creditors. However both France and Germany went a little further telling the Greek people in no uncertain terms that Sunday’s referendum would be an in/out vote on Greece’s position in the euro. Tsipras has since come out and told the Greek people that if they vote to accept the terms of continued EU financial aid on Sunday, then he would get the deal through parliament, then resign.

What does this all mean for the markets then? Well in the currency markets we just had a reminder of what a funny old game it can be. As stated in yesterday’s commentary we began Monday morning in a state of panic with the euro falling sharply with the initial shock of seeing Greece heading for a debt default. EUR/USD fell as low as $1.0975 before trading up about 2.4 percent to USD. 1.1239 and finishing higher on the session than its close on Friday. While EUR/GBP dipped below 0.70 to a new multi-year low at 0.6995, however similar to the dollar story we found ourselves trading higher as the day panned out and finished the session back above 0.71.

This turnaround after the Asian session was in part helped by the Swiss National Bank after they intervened by buying euros when EUR/CHF hit four week lows of 1.0315. The uncertainty around Greece also saw Fed and BoE rate hikes pushed back which resulted in some more selling here. BoE chief economist Andy Haldane is also due to deliver a speech today outlining reasons why the UK needs to hold off on raising rates.

Elsewhere today we had the final reading of UK Q1 GDP which came in above expectations at 2.9%, and higher than the original revision of 2.4% that was first given. Later in the morning we turn our attention to June’s inflation figure for the Eurozone where the market is expecting to see a slight drop. We then finish the day off in the US where consumer confidence is expected to rebound after last month’s unexpected miss. Any volatility here however will most likely be limited as Greece will continue to take centre stage.

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