Greece misses IMF payment focus now on referendum

1 July, 2015

Tom Arnold

So the unthinkable happened – Greece became the first country in history to default on a payment to the IMF. The €1.6bn payment that needed to be made by midnight last night, did not get made, and Christine Lagarde has officially had to tell the IMF’s Executive Board that Greece is in arrears and therefore will not receive any further IMF money until the arrears are paid.

Greece made a couple of last minute efforts to change the terms and in fact the Eurogroup is holding a telephone conference today to discuss the latest proposals from Greece, and indeed are expecting to receive further suggestions from the Greeks this morning.

As a result of this the currency markets did, Absolutely nothing. The reasons for this are completely apparent – the deadline was always going to be missed and in reality as the head of the Austrian Central Bank said yesterday, was not really relevant with the Greek referendum on acceptance of the Troika terms set for Saturday. There will be some feverish negotiating in the coming days and there is still the prospect of a deal being done and the referendum being cancelled. Although with polls now suggesting that the NO vote has dropped below 50% and a mass demonstration in Greece overnight in support of the YES vote, the pressure might actually be coming off, with the Greek people seemingly pushing towards acceptance of the Troika’s demands and hence an EU and Euro stay.

For those of you with an upcoming currency purchase what does this mean? It means that the Euro is weak – cheap to buy – thanks to all of the uncertainty, but that the window to take advantage of that situation could be short – an agreement in the interim or a YES vote win over the weekend and the Euro will almost certainly strengthen – get more expensive – very quickly.

As we enter a new month we start to see all of the standard monthly data releases come out from across the world. It is unlikely anything will be able to grab the focus away from Greece before the weekend, so expect limited effects in that time, but come next week we just might be back to normal service.

As ever stay in close contact with your CI account manager to be kept informed of exactly what is happening and how it is likely to affect your upcoming currency purchase, and if you do want to look at buying your Euros ahead of the Greek decision then why not consider a forward contract.