Market Movers: Yen bid on Greece headlines, Grexit unlikely – TDS

FXStreet (Barcelona) – Prashant Newnaha, Strategist at TD Securities, summarizes the key developments and financial market performance during the Asian trading session, and further comments on the Greece related headlines.

Key Quotes

“The PBoC’s decision to cut lending and deposits rates and RRRs over the weekend was overshadowed by the Greek PM’s snap decision to call a 5th July referendum on whether to accept the Troika’s sales tax increases and pension reforms. Ultimately we expect the process will lead to Greece accepting a new program and remaining within the Eurozone, but regardless of the outcome, uncertainty will remain high this week and over the next month at least.”

“Early this morning Greek officials outlined capital controls coming into force and Greek banks and the stock exchange closed till 6th July with caps on ATM withdrawals set at €60 (pension payments will be exempt from the daily limit). Otherwise there has been no subsequent news flow for the markets to trade on.”

“There was a clear flight to safety bid on the open with treasuries about 15bps lower and staying around those levels as of the time of writing, but ACGB yields have backed up around 6bps from the lows when yields were down as much as 16bps in the 3s and 19bps in the 10s.”

“In FX, the EUR is managing to keep its head above 1.10 for now (but did get down to a 1.0955 low) down 1.3% today. The Yen is the best performing currency in the G10 space and our team recommend the EURJPY short as the safest way to trade current developments. Surprisingly, the AUD and NZD are holding up quite well, possibly supported by Chinese easing, the AUD unchanged and the NZD –0.2%.”

“In EM FX we expect the most liquid and open currencies to come under pressure. As such MXN, TRY and ZAR. PLN and HUF are likely targets. KRW and IDR have been well supported in our zone and with the prospect that EMEA currencies get hammered, a tactical long Asia/ short EMEA FX trade looks an appropriate trade.”

“Otherwise equities are under pressure again after making an initial recovery from the sell off on the open. The NKY, Hang Seng and the ASX are all down more than 2% and Chinese equities are off 3.75%, but were up 2.4% at one point. Gold is up a +0.6%, Brent –1.2%.”

Prashant Newnaha, Strategist at TD Securities, summarizes the key developments and financial market performance during the Asian trading session, and further comments on the Greece related headlines.

(Market News Provided by FXstreet)