So Merkel and Hollande have decided not to go it alone on Greece and instead have called a leaders summit now that things are getting serious in Athens.
From a market perspective, it looks like the EUR has broken through 1.10, but is still only likely to open down 1%, while the German Dax is down some 3.5%.
These movements are roughly similar to those that we saw last Sunday night after the referendum was first announced. This caused an initial knee-jerk reaction lower, however, price action in the days leading up to the referendum suggested that the market thought that the close opinion polls were really masking a Yes vote, and the status quo bias would prevail at the polling booth.
This was not to be, now that we know that the Greeks have voted an emphatic No to the bailout offer (subject to final confirmation from Athens, but looking likely at this stage), the market reaction looks pretty tame and does not seem to be pricing in some of contagion scenarios we have pointed out below. Thus, expect a lot of volatility from the markets in the coming days. Tonight’s initial reaction could be the tip of the iceberg and risky assets could come under sustained downward pressure in the next few sessions as the latest act in the Greek saga unfolds….
For now, the yen is the King of the FX world as it attracts safe-haven flows (or torrents). It is even out-performing gold, cementing its place as the people's safe-haven of choice.To read Kathleen's previous analysis, check out: Oxi- morons: Greece votes no, now for the moment of truth
From a market perspective, it looks like the EUR has broken through 1.10, but is still only likely to open down 1%, while the German Dax is down some 3.5%.
These movements are roughly similar to those that we saw last Sunday night after the referendum was first announced. This caused an initial knee-jerk reaction lower, however, price action in the days leading up to the referendum suggested that the market thought that the close opinion polls were really masking a Yes vote, and the status quo bias would prevail at the polling booth.
This was not to be, now that we know that the Greeks have voted an emphatic No to the bailout offer (subject to final confirmation from Athens, but looking likely at this stage), the market reaction looks pretty tame and does not seem to be pricing in some of contagion scenarios we have pointed out below. Thus, expect a lot of volatility from the markets in the coming days. Tonight’s initial reaction could be the tip of the iceberg and risky assets could come under sustained downward pressure in the next few sessions as the latest act in the Greek saga unfolds….
For now, the yen is the King of the FX world as it attracts safe-haven flows (or torrents). It is even out-performing gold, cementing its place as the people's safe-haven of choice.To read Kathleen's previous analysis, check out: Oxi- morons: Greece votes no, now for the moment of truth
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