There have been three major developments on the Greek crisis over the last forty-eight hours, notes Deutsche Bank.
"First, the Eurogroup meeting yesterday confirmed that the EFSF Greek loan program will expire on June 30th, without an extension...Second, the government's referendum proposal yesterday passed through parliament with the support of the governing coalition as well as extreme-right Golden Dawn. The vote will take place on Sunday July 5 th...Third, the ECB has today decided to cap ELA provision to Greek banks at Friday's level," DB clarifies.
A critical week begins: 3 things to focus on:
First, the ECB reaction function: "We would consider an ongoing ELA cap (possibly with increased haircuts) as the most likely outcome over the course of the week," DB argues.
The second factor to watch will be ongoing Greek domestic political developments: "It is important to note however that the government's stance towards the creditors is becoming increasingly critical, with the re-introduction of the term "Troika" in the political narrative being a notable example. The extent and direction to which the electorate apportions responsibility for recent developments therefore remains an open question," DB notes.
Third, the IMF and European political reaction function over coming days will be important as well. "It is likely that IMF managing director Lagarde notifies the board of a failure to pay event in the days after a non-payment on Tuesday. Whether the EFSF board subsequently decides to accelerate Greece's loans on the back of cross-default loan provisions will be a political, rather than a financial decision signaling a further escalation of pressure from the European side. We would consider more likely that the EFSF board refrains from exercising until after the referendum outcome is due," DB adds.
"In sum, a new chapter of uncertainty has opened up with the Greek crisis. More clarity on the eventual outcome is unlikely until the following Sunday and likely beyond," DB concludes.
"First, the Eurogroup meeting yesterday confirmed that the EFSF Greek loan program will expire on June 30th, without an extension...Second, the government's referendum proposal yesterday passed through parliament with the support of the governing coalition as well as extreme-right Golden Dawn. The vote will take place on Sunday July 5 th...Third, the ECB has today decided to cap ELA provision to Greek banks at Friday's level," DB clarifies.
A critical week begins: 3 things to focus on:
First, the ECB reaction function: "We would consider an ongoing ELA cap (possibly with increased haircuts) as the most likely outcome over the course of the week," DB argues.
The second factor to watch will be ongoing Greek domestic political developments: "It is important to note however that the government's stance towards the creditors is becoming increasingly critical, with the re-introduction of the term "Troika" in the political narrative being a notable example. The extent and direction to which the electorate apportions responsibility for recent developments therefore remains an open question," DB notes.
Third, the IMF and European political reaction function over coming days will be important as well. "It is likely that IMF managing director Lagarde notifies the board of a failure to pay event in the days after a non-payment on Tuesday. Whether the EFSF board subsequently decides to accelerate Greece's loans on the back of cross-default loan provisions will be a political, rather than a financial decision signaling a further escalation of pressure from the European side. We would consider more likely that the EFSF board refrains from exercising until after the referendum outcome is due," DB adds.
"In sum, a new chapter of uncertainty has opened up with the Greek crisis. More clarity on the eventual outcome is unlikely until the following Sunday and likely beyond," DB concludes.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD stays below 1.0700 ahead of US data
EUR/USD stays in a consolidation phase slightly below 1.0700 in the European session on Wednesday. Upbeat IFO sentiment data from Germany helps the Euro hold its ground as market focus shifts to US Durable Goods Orders data.
USD/JPY refreshes 34-year high, attacks 155.00 as intervention risks loom
USD/JPY is renewing a multi-decade high, closing in on 155.00. Traders turn cautious on heightened risks of Japan's FX intervention. Broad US Dollar rebound aids the upside in the major. US Durable Goods data are next on tap.
Gold manages to hold above $2,300
Gold struggles to stage a rebound following Monday's sharp decline but manages to hold above $2,300. The benchmark 10-year US Treasury bond yield stays in the green above 4.6% ahead of US data, not allowing XAU/USD to gain traction.
Worldcoin looks set for comeback despite Nvidia’s 22% crash Premium
Worldcoin price is in a better position than last week's and shows signs of a potential comeback. This development occurs amid the sharp decline in the valuation of the popular GPU manufacturer Nvidia.
Three fundamentals for the week: US GDP, BoJ and the Fed's favorite inflation gauge stand out Premium
While it is hard to predict when geopolitical news erupts, the level of tension is lower – allowing for key data to have its say. This week's US figures are set to shape the Federal Reserve's decision next week – and the Bank of Japan may struggle to halt the Yen's deterioration.