Currency Analyst since 2010

Greece will conduct referendum on austerity

EUR/USD opened with a gap down at 1.1006, but then recovered to 1.1120. After 5 months of talks between Greece and its European creditors the parties failed to reach a compromise.

Greek Prime Minister Alexis Tsipras announced that the country can’t accept the terms offered by the European finance ministers for unlocking the rest of the bailout which expires on Tuesday. Greece will hold referendum on Sunday, July 5, when voters will decide whether to accept a bailout deal by creditors. Tsipras himself has recommended a “no” vote. Such outcome of the vote, however, may lead to Greece leaving the euro area.

The ECB decided on Sunday to leave the emergency liquidity assistance to Greece at 89 billion euro, unchanged from last Friday. On the one hand, such decision helped to stabilize the situation, but on the other there are no fresh funds available for Greek institutions. As a result, all Greek banks will remain closed until after the referendum. According to the government, they will reopen on July 7. There’s a 60 euro limit on cash machine withdrawals until July 6.Athens stock exchange is closed on Monday. The nation has introduced capital controls, so money transfers to destinations outside Greece are prohibited and will require approval from a Ministry of Finance commission.

USD/JPY also made a strong gap down testing 122.10 before returning towards 123.00.

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