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.
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