Group Economics
G10 FX Weekly
Macro & Financial Markets Research Georgette Boele, + 31 20 629 7789 Roy Teo, +65 6597 8616
FX scenarios on Greek vote
2 July 2015 • • •
Currency markets are currently very complacent A Greek YES-vote will result in only a temporary recovery of the euro due to a refocus on cyclical factors… …while a NO-vote could trigger market volatility and a lower euro
Relative calmness in the market
A NO-vote could trigger significant market moves
On Monday morning the euro fell sharply in thin market
If the result of the Greek referendum is a NO-vote, this could
conditions, because of the increased risk of a Greek default
trigger market volatility. This is because the risk for a Grexit
and euro exit. Surprisingly, it staged a sharp recovery
would rise sharply. The results of exit polls will likely come in
afterwards. This reflects that the market was already
before financial markets open on Monday. We expect a risk-off
positioned for euro weakness so some investors used the
scenario with safe haven currencies benefiting. It is likely that
lower euro to close short positions. In addition, there is
the euro will fall under pressure across the board. EUR/USD
confidence that if a Greek exit were to occur, the contagion risk
could test the previous low in EUR/USD on 13 March just
would be limited. This is because exposures to Greece have
below 1.05 in the days that follow. The Japanese yen and the
declined over the last few years. Furthermore, the ECB’s QE
Swiss franc will rally strongly in our view, because of their safe-
and OMT programmes are available to limit volatility and stress
haven characteristics. A stronger Swiss franc is likely to trigger
in financial markets. Moreover, the Swiss National Bank
FX intervention by the Swiss National Bank again. A yen rally
intervened in currency markets to weaken the Swiss franc
to 120 against the US dollar cannot be ruled out. This is likely
which indirectly supported the euro. Later during the week, the
to trigger verbal intervention from the Bank of Japan. On the
euro fell under pressure again versus the US dollar as some
other hand, growth-sensitive and commodity currencies will
improvement in investor sentiment resulted in a refocus on
weaken in our view.
fundamentals and cyclical factors again. US economic data came in stronger-than-expected and this supported the US
ABN AMRO major currency forecasts
dollar across the board. In addition, investors have adopted a wait-and-see approach as they await the Greek referendum outcome on 5 July. In the remainder of this report we focus on the impact of a YES or NO vote in the Greek referendum. Our base scenario is that there will be a Yes-vote that will open the door for a new deal between Greece and its creditors. A YES-vote will result in a refocus on cyclical factors A YES-vote will result in an improvement in overall investor sentiment and a refocus on economic fundamentals and monetary policy divergence. We expect safe-haven currencies such as the yen and the Swiss franc to weaken. The euro may post a recovery but we expect this to be temporary as the market will refocus on monetary policy divergence again. This week US economic data have surprised market consensus positively, especially US employment report was strong. As a result, a September rate hike by the US Federal Reserve will be increasingly likely (our call). This outlook should support the US dollar across the board even as the Greek debt crisis eases. This is because the US dollar is currently driven by cyclical forces such as the relative economic performance and the outlook on the Fed.
EUR/USD USD/JPY EUR/JPY GBP/USD EUR/GBP USD/CHF EUR/CHF AUD/USD NZD/USD USD/CAD EUR/SEK EUR/NOK EUR/DKK
02-Jul 1.1085 123.19 136.55 1.5603 0.7104 0.9482 1.0511 0.7606 0.6685 1.2603 9.3497 8.7963 7.4603
Q3 2015 1.00 125 125 1.47 0.68 1.05 1.05 0.73 0.69 1.27 9.50 9.00 7.46
Q4 2015 1.00 128 128 1.49 0.67 1.05 1.05 0.72 0.65 1.30 9.50 8.50 7.46
Source: ABN AMRO Group Economics
Q1 2016 1.05 130 137 1.52 0.69 1.00 1.05 0.70 0.65 1.31 9.50 8.50 7.46
Q2 2016 1.05 135 142 1.50 0.70 1.00 1.05 0.68 0.63 1.33 9.50 8.25 7.46
Q3 2016 1.10 135 149 1.51 0.73 0.95 1.05 0.67 0.62 1.34 9.50 8.00 7.46
Q4 2016 1.15 135 155 1.51 0.76 0.96 1.10 0.66 0.62 1.35 9.50 8.00 7.46
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G10 FX Weekly - FX scenarios on Greek vote
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