RBA's rate decision eyed, financial markets tumble on Greece vote

Forex News and Events

RBA decision (by Arnaud Masset)

We do not expect much from tomorrow RBA board’s meeting as we think that the Reserve bank is pleased with the recent weakness in AUD/USD. Indeed, the Aussie dropped as low as 0.7452 against the greenback Sunday night and is now back above 0.75. The Aussie sent a strong bearish signal as it broke the strong support standing at 0.7533. We remain bearish on the Aussie against the greenback with the $0.7416 level as next target. We anticipate the weak economic outlook, mostly due to persistent low commodity prices - the price of iron ore, for immediate delivery at the port Qingdao in China, dropped more than 15% since June 11 – and a subdued global demand to maintain the pressure on the AUD.

The Greeks say No (by Yann Quelenn)

Yesterday the Greeks voted massively, at 61.3%, for the “no” against latest bailout terms from creditors. This is a major victory for Alexis Tsipras that announced last week, against all odds, that a referendum would take place.

We now wonder what will be the real impact of this outcome. Yanis Varoufakis, the Greek Finance Minister announced early this morning that an agreement with lenders may still be reached within the next 24 hours. However the Greek finance minister resigned this morning by saying in a note in his blog that most of the Eurogroup participants were reluctant to negotiate further with him.

In addition, despite Tsipras declared that Greece wants to stay in the Eurozone and that negotiations will continue, we remain suspicious that a deal will be settled. Greece is heading toward the EU exit door. Let’s recall that in 2012, the overall debt had been restructured. Three years later, the Greek debt to GDP ratio is higher than ever. At some point we think that an official default will come.

For the time being, Greek Banks remain closed and the cash withdrawal of €60 per day per person is likely to be cut. We also hear talks that a 30% tax on Greek savings above €8,000 is possible. Greek banks are still at stake and this is why Greece’s central bank is now requesting the emergency funding to be raised.

This Monday, Angela Merkel will meet François Hollande. Greece’s creditors have more pressures on the shoulders and therefore they will be more willing to provide significant debt relief measures. The next payment is due to the ECB on July 20th. Consequently negotiations promise to be tense until there.

The EURUSD opened this night with a large downward gap, although much less than last Monday, at 1.0980. Yet, the currency is going up on Greek declarations that “an agreement should reached”. European equities are likely to suffer today.

AUDUSD - Breaking Support at 0.7533