Euro resilient as Greece’s IMF deadline looms

The euro is a lot stronger in early Tuesday trading compared to when markets opened on Monday when there was a knee-jerk reaction to news over the weekend that Greece has imposed capital controls. Also Prime Minister Alexis Tsipras called a referendum on Sunday and urged voters to reject creditors’ demands for reforms.

The euro was surprisingly resilient and bounced from below $1.09 to test the $1.12 level. Investors are taking into account that the rest of Europe may have ring-fenced Greece from a mass fallout effect and so by removing the contagion risk this helps support the single currency. German Finance Minister Schaeuble said that he doesn’t view Greece as a contagion risk for the rest of the euro area.

Another factor helping the euro is the expectation that there will be a “yes” vote on Sunday. There were two polls that came out on Monday that suggested the “yes” camp was stronger.

However, it remains to be seen if the euro will be able to hold onto its gains today as a big risk event lies ahead. Greece is due to pay the International Monetary Fund (IMF) 1.6 billion euros by 6pm Washington time. Failure to pay this amount would mean the Greece is in default and this would increase the risk of a Grexit. Meanwhile, also today, Greece’s current bailout programme expires.

Prime Minister Tsipras spoke on live state TV on Monday night and hinted that he would resign if the result of the referendum was a “yes” vote.

“If the Greek people want to proceed with austerity plans in perpetuity, which will leave us unable to lift our head… we will respect it, but we will not be the ones to carry it out,” he said.

The post Euro resilient as Greece’s IMF deadline looms appeared first on Forex Circles.

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