Update on EUR and Greek negotiations

The last 3 day’s of trading have confirmed the view in my previous post that EUR was likely to fall (EURUSD down close to 2% thus far) with generally good news about the Greek crisis (due to the funding currency nature of EUR in the post-ECB QE and negative deposit rate world).  And thus far only limited EUR upside with bad news (reflecting perception that a breakdown would be met by large/swift ECB action and bad news really being bad news for EUR given how serious the situation has become).  And that the negotiations could go down to the last minute with intra-Syriza politics being a bit of a wild card.  Also given a bit of a boost by the upside news to US home sales, outweighing the continuing concerns about US manufacturing.  Central case should still be that the remaining differences (IMF playing hardball about the over-reliance of the Greek proposals on tax rises) will be resolved by the Greeks eventually offering further concessions (given the likely severe consequences of not doing so, and likely taking an electoral hit), biasing for further EUR downside.  But given the state of play of the negotiations and how far/fast EUR has already fallen this will likely be harder to come by near term.

EUR follow up chart from bloomberg 24 June 2015


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