Over to you Mr Tsipras
14 July, 2015
So yesterday finally saw an agreement reached between the Troika and the Greek Prime Minister, which paves the way for a third multibillion Euro bailout for Greece. The funds should allow the Greek government to save the Greek banks, stay in the Euro and turn around the ailing Greek economy. The terms are more stringent and critically more austere than those offered only two weeks ago and subsequently rejected by the referendum held in Greece 10 days ago, but when you are drinking in the last chance saloon you take what you can get.
The problem with this is that 61% of the Greek people voted “No” in that referendum and they don’t care which saloon is in use, they just want an end to austerity. Mass demonstrations have already started, a general strike has been called for Wednesday, and the people are most definitely letting their feelings be heard.
So now Mr Tsipras has the hardest job of all – he has to get four key pieces of legislation through the Greek parliament by the close of play tomorrow, including pension and VAT reform bills. So, to clarify, he has to get increased austerity bills voted for by a government formed on an anti-austerity manifesto. It is no wonder that numerous members of the government are coming out and saying they will not support the bills, with some even likening the new agreement to a coup. As a result there is talk of a cabinet reshuffle and possibly even the formation of a new government in the form of a change of coalition partners for Syriza, but critically very little time. Failure to meet the deadline almost certainly means collapse of the Greek banking sector and a Grexit.
For those of you with an upcoming currency requirement, what does all of this mean? It means the Euro is once again very weak, as fears of a Grexit flood the market, but that come Wednesday night, if the bills are passed, the Euro could gain back much of the strength it has lost over the last few months. So if you are buying Euros, then securing your rate before Wednesday night is likely to be a very good idea, and if you are selling Euros then cross your fingers that Mr Tsipras can work some magic, and come Thursday/Friday rates could have massively moved in your favour. If you requirement relates to the US Dollar then remember it tends to do the opposite to that which the Euro does, so strengthening Euro post Wednesday could mean a weaker US Dollar.
Today is a very busy day on the markets with a mass of data out home and abroad. We have already seen low CPI inflation in Germany slightly knock the Euro, and in the UK we have CPI, RPI and PPI inflations all due out at 9.30am followed by the BoE inflation hearings at 10.15. We have further European data in the form of the German ZEW survey and European industrial production numbers and then in the US we have retail sales this afternoon.
As ever, stay in close contact with your CI account manager to be kept informed of exactly what is happening and what your options are for your upcoming currency requirement. Remember if you do want to take advantage of the current Euro buying levels, you could book the rate now on a forward contract even if you do not need the currency for some time.
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