Last Minute Deal in Greece?

Posted on

Market Drivers June 30, 2015

EUR slides to 1150 as hedge funds sell the gap fill
UK GDP data revised to 0.4% from 0.3%
Nikkei -0.63% Europe -0.90%
Oil $58/bbl
Gold $1175/oz.

Europe and Asia:
AUD New Home Sales -2.3% vs. 0.6%
EUR GE Retail Sales 0.5% vs. 0.0%
EUR GE Unemployment -1K vs. -5K
GBP UK GDP 0.4% vs. 0.4%

North America:
CAD GDP 08:30

USD Chicago PMI 09:45

It’s been a volatile night of trade with EUR/USD first dropping below the 1.1150 level as hedge fund shorting of yesterday’s short covering rally and end of month flows weighed on the pair, only to see it pop back up in speculation that Greece may yet come back to the negotiating table in an attempt to salvage an 11th hour deal.

When the regular Athens briefing was cancelled traders quickly bid up the euro on rumors that Greek leader Tsipras may reconsider last night’s offer from EU. The Greek officials confirmed that there will not be another press briefing today, but refused to comment on any other questions as to whether Mr. Tsipras will accept the latest proposal from Mr. Junker.

Just yesterday any possibility of a last minute deal appeared to be dead after the Greek delegation walked out of the negotiations over the weekend and called for a referendum next Sunday. However with the formal deadline for the bailout package not set to expire until end of day, markets are holding out the last ray of hope that some sort of an agreement may be reached.

With Greece economy quickly devolving into pandemonium as capital controls are installed, banks and stock markets closed for the week and tourists stranded as payment mechanisms cease to function the situation is clearly becoming very tense and may be forcing Mr.Tsipras to act sooner than he would have liked.

Clearly, all parties are motivated to act within the formal framework that already exists, even if it is simply to extend the current agreement for the next 6 months. The Greek officials may be starting to feel enormous pressure to alleviate the chaos caused by the rupture in negotiations and the freezing of ECB ELA funds at current levels. With Greek banks closed and payment systems not working the Greek economy has effectively ceased to function and as result the political pressure on Mr. Tsipras could have increased exponentially.

With every headline driving the market, trading in EUR/USD is likely to remain volatile for the rest of the day. If no deal is reached the pair could see a steep selloff irrespective of the referendum results on Sunday as the conditions on the ground continue to deteriorate. For now the markets remain in wait and see mode with euro bulls hoping for some relief before the end of the day

Boris Schlossberg
Managing Director

Leave a Reply

Your email address will not be published. Required fields are marked *