Greek Saga Continues To Weigh On Euro Sentiment

WEEKLY FX OUTLOOK – The ongoing Greek saga continues to weigh on EUR sentiment, with all eyes on this weekend’s Greek referendum and the potential aftermath

Focus this week has remained on Greece with the passing of the IMF’s payment deadline failing to bring a culmination to the saga. Greek PM Tsipras ended last week by calling a referendum on whether the Greek public should accept their creditors imposed conditions on further loans, leading to EUR opening substantially lower on Monday morning. EUR then strengthened over the first half of the week to reach last week’s levels amid a flood of source comments, with EUR/USD breaking above the 1.1200 handle amid news of Greece offering to accept EU’s Juncker’s latest proposal with some alterations and rumours that the referendum may be cancelled.

The rest of the week saw positive sentiment fade with EUR/USD ending the week around the 1.1100 handle heading into the risk event (Greek referendum) over the weekend after Tsipras went on to state that not only would the referendum go ahead, but by lobbying for a `No` vote. Heading into the weekend, polls suggest that the `Yes` and `No` vote are neck and neck. This has helped bolster USD, with the greenback ending the week firmly in green despite a spate of weak US data, including a lower than expected Nonfarm payroll report (223K vs. Exp. 233K, Prev. 280K, Rev. 254K) on Thursday ahead of the Independence day long weekend.

Antipodeans have been under pressure throughout the week, with NZD weighed on by a poor Fonterra Milk Auction, seeing the currency decline against the USD for the 11th consecutive week, with NZD currently the worst performing currency YTD. Elsewhere, AUD ends the session near 6 year lows after disappointing Retail Sales (0.3% vs. Exp. 0.5%), with soft Chinese HSBC PMI readings further weighed on the currency.

Looking ahead, next week will see the aftermath of the Greek referendum with both the Greek government and their creditors currently partaking in Brinkmanship as Tsipras has stated he will resign if there is a `Yes` vote and creditors suggesting that a `No` vote is a vote for Grexit. Elsewhere, next week sees the RBA Rate Decision, US FOMC Meeting Minutes, UK budget statement and BoE Rate Decision as well as a host of Fed speakers.