Forex - Euro drops as Greece heads for 'No' vote; EZ scrambles for talks

Investing.com - The euro fell sharply on Monday in early Asia as voters in Greece rejected the proposed bailout terms from international creditors, placing the question of the country's continued membership in the euro zone at the front and center of global financial markets as top officials from the currency block scrambled to meet to and decide the next steps.

Reports suggested that as many as 60% of voters rejected the terms worked out over months of tense talks. Greek Prime Minister Alexis Tsipras said Sunday the “no” vote is not a mandate to clash with Europe, and the country is ready to continue negotiating with a plan of reforms.

"With the difficult circumstances prevailing today you made a very brave choice," Tsipras said in a televised address to Greeks. "I'm fully aware the mandate you gave me is not one of a rupture with Europe but a mandate to strengthen our negotiating position to seek a viable solution."

EUR/USD traded at 1.1022, down 0.80%. while USD/JPY changed hands at 122.34, down 0.36%. AUD/USD traded at 0.7493, down 0.31%.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, jumped 0.25% to 96.62.

Emergency talks were unbderway among the European Central BVank, European Commissioner President Jean Claude-Juncker and major creditor Germany on the next steps forward with banks in Greece expected to remain shut on Monday and furture funding sources in doubt.

Last week, the dollar was lower against the other major currencies in holiday-thinned trade on Friday as disappointing U.S. jobs data and uncertainty ahead of Greece’s bailout referendum over the weekend clouded market sentiment.

U.S. markets remained closed on Friday for the Independence Day holiday.

The dollar remained on the back foot after the latest U.S. employment report tempered expectations for higher interest rates later this year.

The Labor Department reported Thursday that the U.S. economy added 223,000 jobs in June, compared to expectations for jobs growth of 230,000.

Hourly earnings were flat in June, missing expectations for growth of 0.2%.

The Federal Reserve has said that continued strengthening in the labor market is a key factor in deciding when to start hiking interest rates.

Major currencies stuck to recent ranges as investors looked ahead to a weekend referendum in Greece on whether to accept or reject the terms of an international bailout deal.

Tsipras had called for a No vote, saying a vote against the proposals would give him a stronger mandate to agree a third bailout Greece’s creditors.

On Thursday the international Monetary Fund warned that Greece’s public finances will not be sustainable without a substantial debt write-off and added that the country will need an additional €50 billion in aid over the next three years to remain afloat.

Greece became the first developed country to default on the IMF after its second bailout program expired late Tuesday.

The week ahead will bring a look at U.S. service sector activity. Wednesday’s Federal Reserve minutes and central bank meetings in Australia and the U.K. will also be in focus.

On Monday, Germany is to release data on factory orders.

Switzerland is to publish a report on consumer inflation.

Canada is to publish a report on the Ivey business index.

In the U.S., the Institute of Supply Management is to release data on service sector activity.