Will Greece be forced to leave the Euro?

The Greek government has announced capital controls meaning that banks will be shut all week, following news that the ECB will stop emergency funding ahead of a Greek referendum on Austerity due 5^th July. Cash withdrawals will be limited to €60 Euros a day in a bid to prevent a run on the banks and save what they can ahead of next Sundays critical vote. To date the ECB have provided emergency funding to the Greeks which allowed “business as usual” as they were offered some protection from those withdrawing funds. On Sunday it was announced the ECB were withdrawing this, after the Greek Parliament backed a referendum for the 5^th July in Saturday. Whoever is to blame for the clear breakdown it is fairly apparent that the repayment due tomorrow will not be made.

As a result we saw rates go wild over the weekend with GBP>EUR touching 1.43 (breaking the previous year’s high). Albeit it has now corrected back down to the levels we saw at the end of last week. And whilst Greece blames the Eurozone for the breakdown in talks stating their terms were not viable, it would seem now that Tsipras will have a lot to think about in the coming days. Whilst the Troika now seeming to have dug in and made a stand – take austerity pay us and stay, it would seem that the Greeks have done similarly. And whilst a referendum would suggest a potential Grexit from the Euro, Tsipras retains some hope that he may still be able to steer Greece away from Austerity without having to lose the Euro as the country’s currency.

Without doubt we are in for another extremely turbulent week. And with GBP>EUR rates reaching a new 7-year high over the weekend it would only seem that the stakes are increasing as this situation continues, so expect volatility. And certainly be prepared for a potential snap back in rates should any positive news be heard, or agreement be reached.

With little data out this week the driving force in market rates is likely to remain Greece. Should you have any upcoming international payments to make, be sure to stay in close contact with your Currency Index account manager who can help you stay well informed, in what is a particular turbulent time in the currency market.

Currency News This Week

Mon

12.00     EUR        German Harmonized Index of Consumer Prices

Tues

07.55     EUR        German Unemployment change and rate

08.00     AUD       RBA Governor Glenns Speech

09.00     EUR        Consumer Price Index Data

Wed

14.00     USD       ISM Manufacturing PMI               

Thu

11.30     EUR        ECB Monetary Policy Meeting Accounts

12.30     USD       Non-farm payrolls

12.30     USD       Unemployment rate

Fri

07.15     EUR        Spanish Markit Services PMI