My first comment is that is pretty annoying to have to deal with Greece volatility this Sunday when I would rather bask in the US Woman's World Cup win!! #USAUSAUSA...truly dominant performance.
My second comment is this feels a lot like last Sunday if you look at price action in the Euro and global markets. Meanwhile tonight versus last Sunday the Euro-group feels even more vindicated. They didn't call for the referendum and its not up to them to interpret the results. They may be interested in letting everything breath for a while and see how Greece reacts. Right now they don't have to react.
On Euro trading since the NO vote: the Euro did exactly what it did last weekend on Sunday when it dropped quickly inside 1.10 before bouncing back to 1.1080. Last Sunday the intra-day volatility on the currency was over 4% and the Euro's eventual strength as markets opened Monday was unexpected.
Bonds are acting the same way was they did last Sunday and we now should see the Bund move even further inside last weeks range. We said last week that we expect the 10yr Bund to move inside of 0.50%
What else can you expect?
- PIIS (no longer PIIGS I guess) peripheral yields up
- Treasury yields down and will test through last weeks lows
- Equities down globally with the Germany hit hardest (trading 1.8-2.5x US to the downside but Spain and Italy worse
- EM FX will be hit
- Yen will rally
- Oil and commodity currencies down on broad risk-off sentiment
Key levels – EUR holding below 1.10, JPY below 122, EURGBP below 0.70. If we consolidate below two of these three levels we will like see further moves in the same direction.
China also rallying on open and pulling back but still up on the day. Watch to see if negative reversal close will put more spokes into global players who think China is next to blow. We don't...