6 Jul 2015
EUR/USD outlook remains neutral post Greece Referendum – JPM
FXStreet (Barcelona) - With the Greeks choosing a ‘No’ vote in the referendum, John Normand of J.P.Morgan, sees explains why he remains neutral on EUR/USD.
Key Quotes
“For strategy, we’ve avoided positioning around the Greek referendum because the risk-reward seemed poor unless three conditions were met: Greece said No, contagion to the rest of Europe would be significant and the ECB needed to increase its balance sheet materially beyond current QE-related targets to contain the stress. The first condition for euro downside has been met today, but the second and third may not be, despite the landslide referendum vote. So we remain neutral EUR/USD except for a 1-mo long volatility position in the Derivatives portfolio.”
“If this vote does bring disorder to global markets, the portfolio is positioned for that outcome through a range of trades held to position around China risks (long JPY vs CAD), Fed tightening (short MXN and TWD) and non-US central bank easing (short NZD vs SEK and GBP).”
Key Quotes
“For strategy, we’ve avoided positioning around the Greek referendum because the risk-reward seemed poor unless three conditions were met: Greece said No, contagion to the rest of Europe would be significant and the ECB needed to increase its balance sheet materially beyond current QE-related targets to contain the stress. The first condition for euro downside has been met today, but the second and third may not be, despite the landslide referendum vote. So we remain neutral EUR/USD except for a 1-mo long volatility position in the Derivatives portfolio.”
“If this vote does bring disorder to global markets, the portfolio is positioned for that outcome through a range of trades held to position around China risks (long JPY vs CAD), Fed tightening (short MXN and TWD) and non-US central bank easing (short NZD vs SEK and GBP).”