Deal or No Deal for Greece

10 July, 2015

Tom Arnold

So as another week draws to a close we find ourselves with a busy day ahead, and unusually for the currency markets, a busy weekend ahead. The markets are still dominated by what is happening in Greece, with new proposals submitted in the last few hours by Greece in an effort to try and reach a deal before their banks completely run out of money. The proposals are thought to be quite similar to those submitted by the Troika last week, and therefore should stand a chance of being well received. The Troika would need to agree the proposals today, for them to then go forward to the Eurogroup meeting over the weekend to be ultimately agreed.

There is also still the sticking point of the Greek parliament ratifying the proposals, which is expected to be voted on today – with the proposals thought to be pretty close to those that were rejected in the Greek referendum last weekend, could the Greek parliament back the people and kick the proposals out or will they instead choose to stick with their European partners?

Either way, by the end of today we should have a pretty good idea what is going to happen over the weekend in terms of a deal or no deal, with the currency market landscape likely to be very different come Monday.

A Greek deal if done, is likely to give the Euro a big boost. We have seen already this week the Euro gain some strength as the rumour mill heads towards a positive outcome, and this provides a pretty clear clue as to what we can expect if a deal is done. The Euro is very under priced at the moment due to all of the talk of crisis, and so a significant snap back is very likely if/when a deal is done. On the flip side we will probably see a correction back to the rates we saw at the start of the week if a deal doesn’t materialise, but due to the pricing in, we would not expect to see a sudden surge up towards 1.50.

For those of you with an upcoming Euro requirement who might be hanging on in the hope of such a surge, I would definitely err on the side of caution. A deal now seems relatively likely and you could definitely lose a mile holding out for an inch.

In other news this morning sees UK trade balance figures come out, which while not market critical are expected to show a significant increase in the deficit between in the UK’s international trade. The Bank of England recently warned that this deficit could become “harder to finance”, so while not normally a market mover of significance, a larger deficit could cause some pressure on the Pound.

Please make sure you 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.