Greece- Watch Out For The Volatility

Investors will be on the edge this weekend because the Greece saga could end this weekend. If traders were anxious going into the weekend last week, the risk averse attitude will be even more intense today. This will be ‘make it or break it’ kind of thing and under such a scenario, it is always best to wait for the outcome rather than trade on speculation.

The IMF payment is due on the 30th of June, which is on Tuesday, and Greece certainly does not have the funds to pay them. This will inevitably trigger a default situation. If any party is going to cave, perhaps this will be the time when you will experience those cracks appearing.

Capital control looks inevitable if there is no deal on Greece or even if the negotiations continue next week. The ECB is holding the bloodline and the supply of this is being checked on a daily basis and if the ECB pulls the bug, Greece will have no other option, but to trigger the capital control button. So, if we dnt get a deal or this negotiation prolongs further, the ECB, which has been dragged into this political arena will be forced to shut down the liquidity tap, and as a result, Greek banks will be ordered to keep their doors closed and capital control will occupy the streets.

Considering the above factors, volatility is immense and will carry on tearing its previous highs if there is no solution on this. The Euro will remain under pressure as a result of this and investors will park their funds in less risky assets. We expect tremendous sell off for the Greek equity market and the financial sector will continue to feel the most amount of pain. The spill over effects or the dark clouds of this will make the investors to lose their appetite for the European stocks because of the Grexit fears.

The next biggest focus for the markets will be the ECB payment which is due in July.

Disclosure & Disclaimer: The above is for informational purposes only and NOT to be construed as specific trading advice. responsibility for trade decisions is solely with the reader.

by Naeem Aslam