With the recent deterioration in Greece, there is increased talk about the chance of Greece leaving the euro-zone, aka “Grexit”. Mohamed El-Erian, chief economic adviser at Allianz, said the odds stand at 85%. European officials already talk about this in the open.
The team at BNP Paribas sees a higher chance of a more optimistic outcome and explains what moves the common currency:
Here is their view, courtesy of eFXnews:
BNPP’s economists estimate a 75% probability that the Greek referendum will result in bailout conditions being accepted.
“However, much uncertainty will prevail over the week ahead of the referendum. We view there are two potential flows that will be impacting the EURs move from here over the short-term,” BNPP argues.
“On one side, rising political risks and expectations of further ECB easing make the EUR an attractive short.On the other side, there likely remain some residual EUR-funded risk trades after last week’s positive sentiment from Greece which could be unwound,” BNPP clarifies.
“Net-net, we remain EUR bears, highlighting from a positioning perspective EUR shorts currently stand at -11, close to their lightest level this year,” BNPP adds.
For lots more FX trades from major banks, sign up to eFXplus
By signing up to eFXplus via the link above, you are directly supporting Forex Crunch.