Greek ‘No' vote sees initial weakness in EUR before Varoufakis' resignation bolsters the currency

This week has kicked off in a familiar fashion, with Greece in centre stage. Yesterday’s `No` vote in the referendum and subsequent uncertainty for Greece led to initial bearish sentiment for EUR, with many investment banks now making a Grexit their base case scenario. The dampened sentiment saw EUR open below its 100DMA of 1.1039 eventually falling to its lowest levels in a week during Asia-Pacific hours, with AUD/USD falling below the 0.7500 level for the first time since May’09 amid fears of a Grexit and JPY strengthening as a consequence of safe haven flows to see USD/JPY trade below the 122.00 handle early in the session.

However, much of the EUR weakness was pared during the European session after Greek Finance Minister Varoufakis announced his resignation. The controversial member of the Greek government had regularly conflicted with his Eurogroup counterparts and in his resignation stated he `shall wear the creditors’ loathing with pride`. His resignation was therefore seen as a positive for EUR, with an agreement more likely with him not at the negotiating table. The move higher in EUR also came in tandem with upside in EUR/CHF, which is speculated to have been supported by the SNB.

Looking ahead, tomorrow may very well see focus remain on Greece with a Eurogroup and leaders’ summit both scheduled to take place, while also on the calendar there is the RBA rate decisions, UK Industrial and Manufacturing Production, US Trade Balance