Post-Referendum: Indecision Will Increase Volatility This Week

Well clearly the answer is no and the Greek turkeys have done the same. No great surprise, and perhaps even less so when you consider the questions being asked.

Question one, would you like to pay more tax – answer yes or no.
Question two, would you like to see more cuts – answer yes or no.

Question three – oh I forgot there was no question three. And on that resounding and in depth survey which was no doubt dreamt up on the back of a fag packet in a Greek cafe, the finance minister et al are now off to Europe to demand a renegotiation of the debt. Which is odd when one considers what happens in the very different world of personal bankruptcy where the first step is the bailiffs appearing on your doorstep and not the other way round. Perhaps Greece should consider selling off some of its assets to pay of its creditors, and we can add these to the Elgin marbles. What is perhaps most damning of all only 59% of the population voted.

The vote has clarified nothing, least of all whether Greece will stay in or leave the European Union. The victory, if you can call it that is a pyrrhic one for the prime minister and a classic example of what happens when the left gains power. In the UK, it was Gordon Brown and his cronies who spent their way into oblivion. For Greece and the Greek people nothing has been resolved. All it means is Greece will attempt to leverage even more favourable terms on a debt which will never be repaid as spending will continue apace funded by Europe. Ultimately a realization that all debts have to be repaid will prevail, but by then it will be too late.

Turning to the markets, as always indecision will dramatically increase volatility this week, with major swings expected on flows out of the euro and initially into safe haven asset classes such as the dollar, and perhaps the British pound, and we may see the latter effect in the EUR/GBP as a result.

As the markets prepare to open, forecasts are for a second consecutive gap down open for the EUR/USD, but remember what happened last week, with a consequent snap back on the day. We may see this repeated again tomorrow as European leaders have too much at stake to allow Greece to bring the European project to a shuddering halt, so a solution will be found – at the 13th hour!

Finally, with all this turmoil, it will be interesting to see any reaction in Gold, which to date has continued its serene and stately progress lower. Sadly, for now it seems we are in for more weeks of Greek farce.