The euro slipped sharply to 1.0970 on Greece’s ‘No’ vote. Greece voted with a 61 percent majority against further austerity demanded by creditors, rejecting of further spending cuts and tax increases. While Prime Minister Alexis Tsipras described the result as a “great victory”, seeing himself with a strengthened hand now, the result also significantly raises the chances of a Greek exit from the currency bloc. The euro group must now decide if a financial rescue of the country is still possible.
Euro-area leaders called for an emergency summit on Tuesday. The European Central Bank is meeting today to discuss extending its emergency credits to Greek lenders. As long as negotiations are ongoing between Greece and the euro group the ECB is unlikely to cut the emergency liquidity for Greek banks. The next important date is the July 20 deadline, when Greece is due to pay 3.5 billion euros to the ECB. A non-payment could lead to drastic steps such as an exit of the euro-area.
Even if contagion for other peripheral economies in the euro zone is likely to be contained, investors could remain risk-averse and wait and see what happens now.
The British Pound traded lower against the U.S. dollar last Friday. We see a next support at 1.55. With a significant break below 1.5480, sterling may slide towards 1.5430 and further 1.5350. Current resistances are seen at 1.5650 and 1.5770.
Apart from eurozone financial stability risks in the near term, market participants will keep an eye on the U.S. monetary policy. The Federal Reserve releases FOMC minutes from its June 16-17 meeting on Wednesday. The Bank of England is scheduled to decide on monetary policy on Thursday.
The most important piece of economic data this week will be the ISM Non-Manufacturing Index, due for release today at 14:00 GMT.
We wish you a good start to the week and good trades.
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