21 Jul 2015
A Greek tragedy and EUR 1.05 by year end - NAB
FXStreet (Guatemala) - Analysts at NAB explained that a ‘Grexit’ may have been avoided but the alternative will be very bad for the Greek people and the EMU project.
Key Quotes:
"EUR/USD will remain pressured as investor confidence in Europe and its institutions is severely damaged."
"With Greece looking to have avoided defaulting to the ECB (and able to repay the IMF) via recourse to the bridging loan that should be disbursed on the day of this publication, and China’s stock market having stabilised more than 10% above recent (July 8) lows, there’s little further that needs to be said about the USD side of all the major currency pairs other than “watch the domestic numbers and beware the external risks”."
" Though an imminent ‘Grexit’ scenario looks to have been averted, the biggest external risk for the Fed remains Greece and where, to our eyes, all the near-term outcomes point to a lower EUR whether or not the country remains part of the Eurozone."
"Indeed, with the people having voted in a referendum to reject the terms of a bailout deal which was no longer on offer, the Greek Government has now voted to pass laws and implement creditor demands which it doesn’t believe in. It really is an absurd situation in which no individual or institution emerges with their status enhanced.""
"The key challenges can be divided into immediate – default and Grexit - and longer-term. The compromise solution that looks to have avoided the former has been politically costly for the EU and severely damages its credibility."
"For the longer-term a bigger conundrum remains unresolved. An explosively-timed IMF report on debt sustainability shows the Fund sees only three possible outcomes: a debt write-off or haircut, a 30 year grace period for Greek interest payments or permanent annual fiscal transfers from Eurozone states."
In the absence of at least one of these, it will not participate in a third bailout. But, we already know that the EU will not go it alone without the IMF and that German Chancellor Merkel has said unequivocally there will be no nominal haircut. Clearly something has to give here. With EU credibility in tatters and confidence shattered, the Greek tragedy should embarrass the euro enthusiasts who have consistently set aside economic objections to the Single Currency project; believing instead that every piece of allegedly short-term pain is worth the price of European unity."
"It does not bode well for EMU governance going forwards and will place constant doubt and questions over the way in which economic policy is formulated and implemented. We re-iterate our call for the euro to trade lower and look for EUR/USD1.05 by year-end.""
Key Quotes:
"EUR/USD will remain pressured as investor confidence in Europe and its institutions is severely damaged."
"With Greece looking to have avoided defaulting to the ECB (and able to repay the IMF) via recourse to the bridging loan that should be disbursed on the day of this publication, and China’s stock market having stabilised more than 10% above recent (July 8) lows, there’s little further that needs to be said about the USD side of all the major currency pairs other than “watch the domestic numbers and beware the external risks”."
" Though an imminent ‘Grexit’ scenario looks to have been averted, the biggest external risk for the Fed remains Greece and where, to our eyes, all the near-term outcomes point to a lower EUR whether or not the country remains part of the Eurozone."
"Indeed, with the people having voted in a referendum to reject the terms of a bailout deal which was no longer on offer, the Greek Government has now voted to pass laws and implement creditor demands which it doesn’t believe in. It really is an absurd situation in which no individual or institution emerges with their status enhanced.""
"The key challenges can be divided into immediate – default and Grexit - and longer-term. The compromise solution that looks to have avoided the former has been politically costly for the EU and severely damages its credibility."
"For the longer-term a bigger conundrum remains unresolved. An explosively-timed IMF report on debt sustainability shows the Fund sees only three possible outcomes: a debt write-off or haircut, a 30 year grace period for Greek interest payments or permanent annual fiscal transfers from Eurozone states."
In the absence of at least one of these, it will not participate in a third bailout. But, we already know that the EU will not go it alone without the IMF and that German Chancellor Merkel has said unequivocally there will be no nominal haircut. Clearly something has to give here. With EU credibility in tatters and confidence shattered, the Greek tragedy should embarrass the euro enthusiasts who have consistently set aside economic objections to the Single Currency project; believing instead that every piece of allegedly short-term pain is worth the price of European unity."
"It does not bode well for EMU governance going forwards and will place constant doubt and questions over the way in which economic policy is formulated and implemented. We re-iterate our call for the euro to trade lower and look for EUR/USD1.05 by year-end.""