The foreign exchange market was further punctuated by Greece after Prime Minister has surprised everyone by announcing a referendum on the second aid plan and the surprise cut interest rates by the ECB, noted Friday Natixis. “Despite the rise of systemic risk, the euro, however, relatively well against the dollar remaining in a range between 1.36 and 1.3850. In fact, the referendum was canceled in front of the sling and the international ultimatum launched in Greece for its maintenance or not in the euro area, which reduces the risk on the euro. ”
However, the uncertainties are far from being all removed. As long as the second Greek plan is not adopted, the payment of the sixth installment of the international financial assistance will be blocked. In addition, other peripheral countries remain under pressure especially Italy, whose long-term rates remain above 6%, a level detrimental in the long term.
As such, the ECB may not be of much help. Mr. Draghi has made it clear that the debt purchase program is limited and temporary devices. Finally, as pointed out by the ECB, growth European recession is expected to moderate later this year enough to keep even the expectations of rate cuts by the ECB. For these reasons, we remain cautious on the euro in the short term.
However, the increase in systemic risk has mainly affected the high-beta currencies (currency conveniently and Scandinavian). The AUD was also weakened by lower interest rates by 25bp to 4.50% of the RBA. L ‘AUD will have a limited upside potential in the future knowing that the RBA should once again lowered its rates.
The yen was affected by the intervention on the foreign exchange market of the BoJ, pushing the USDJPY to 75.35 to 78. The BoJ seeks to halt the yen’s appreciation and will continue to intervene in a timely manner. A Once past this episode of risk aversion, however, will leave the USDJPY down to 76. The EURCHF has managed to hold above 1.22 despite the setbacks of the euro and this should still be the case short / medium term.
