Euro trade on hold ahead of Greece's Sunday referendum

Good Morning,

- Euro trade on hold ahead of Greece's Sunday referendum…

- U.S. markets closed on Friday in observance of Independence Day

- Asian stocks fell as Chinese stocks extended their plunge.

- The IMF warned on Thursday that Greece would need an extension of its European Union loans and a potentially a large debt write-off if it cannot implement economic reforms and its growth slows.

- EU's Dombrovskis says door remains open for Greece. EU working to keep Greece in the Eurozone; Greece is an "isolated case"; solution for Greece was tangible; Greece in worse position now that last week; Stating the berleedin' obvious on that last one; Says Drombrovskis; "It would be wrong to assume that a No vote would strengthen Greece's negotiating position. The opposite is the case";

- Greece is divided right down the middle heading into Sunday’s referendum on European bailout proposals, portending even more upheaval for the stricken nation. A poll commissioned by Bloomberg News showed 43 percent intend to vote “no” to reject the austerity demanded by creditors in exchange for financial aid; 42.5 percent back a “yes” to accept the conditions, the survey of 1,042 people by the University of Macedonia Research Institute of Applied Social and Economic Studies showed. The margin of error was 3 percent.

- Credit Agricole: Trading The Greek Referendum. The Greek referendum will be a binary event. A 'yes' vote should boost risk appetite and give investors more confidence that the Fed will hike rates later this year. This is our central scenario and we expect USD to be among the main beneficiaries under this outcome. Any relief rally in EUR should be short-lived with renewed losses likely before long, especially against USD. We maintain a long USD/CHF position in our portfolio. A 'no' vote will be a risk-negative outcome that will fuel Grexit fears. EUR should fall, especially against the majors, while European G10 currencies should underperform the rest. European risk-correlated currencies (eg, NOK and SEK) could be among the hardest hit in the wake of a 'no' vote, while European safe haven currencies like CHF and, to a degree, GBP should underperform their non-European counterparts USD and JPY. Market visibility will indeed worsen significantly, however, given that it could take months before we know the ultimate fate of Greece. To the extent that this keeps the hopes of a deal alive markets may even return to their ‘holding pattern’ after the initial sharp selloff.

- As people across cash-strapped Greece wait to vote in a referendum on Sunday on whether to accept proposals made by creditors, what can be learned by examining similar economic crises in Iceland and Cyprus? In 2007, the Icelandic economy appeared healthy. Its real Gross Domestic Product (GDP) was 35% higher than it was in 2002, unemployment was 2.3% and government debt was a modest 27% of GDP. However, the assets of its three largest banks had grown to over nine times GDP, a size that made it impossible for the Icelandic central bank to act as an effective lender of last resort. Thus, regardless of the quality of the banks' assets, the predictable consequence was a bank run and the subsequent collapse of the Icelandic banking system. Following the demise of its banks, Iceland imposed capital controls to prevent massive outflows and a plunge in the value of its currency.

- US data yesterday showed 223,000 new jobs last month, fewer than the 230,000 increase forecast by economists polled by Reuters. The government also downgraded its reading on April and May job growth.

- The Spanish service sector continued to record sharp growth of business activity during June on the back of further ne w order growth. Increases in new work led companies to take on extra staff, and the rate of job creation quickened for the seventh month running.

- Australian retail sales rebounded in May but still missed expectations for a third straight month, a blow to hopes for a sustained and much-needed pick up in consumer spending.

- Watch today: Europe PMI and EZ retail sales.

Have a nice Week!