Greek talks are now officially on hold until the Greferendum on Sunday. The Eurogroup shut the door after the defiant speech from Tsipras.
In any case, the team at BTMU sees the euro facing downwards pressure:
Here is their view, courtesy of eFXnews:
The euro remains very resilient to the marked upturn in risk related to ‘Grexit’ toward month-end after a referendum was announced and capital controls were introduced in Greece until 7th July, notes Bank of Tokyo-Mitsubishi (BTMU).
“Under ECB QE, the euro has been undermined by speculative selling as investors use the euro as a funding currency and by capital flight with a large swing in net fixed income flows. An event risk like ‘Grexit’ creates uncertainty around this trade and provides support as it is reversed,” BTMU adds.
“We have laid out the possible scenarios in regard to Greece and under our assumption, we expect appetite for the ‘ECB QE trade’ to return and for investors’ use of the euro as a funding currency to be revived once the intense uncertainty fades. The current crisis will no doubt undermine business confidence in the euro-zone and hence will likely reinforce the ECB’s determination in implementing the QE program in full,” BTMU argues.
“In our assumed scenario we would then expect that the relative macro divergence returns as the focus following a Greece resolution and EUR/USD then weakens beyond parity by year-end. Our Q2-2016 EUR/USD forecast 1.0000.” BTMU projects.
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