So that is that. It is official. Greece has elected not (or been unable) to pay back the loan of EUR1.6bn to the IMF. But it doesn’t mean they are out of the Euro. Far from it.
There is a long way to go before Greece would fall out of the Eurozone, and keep in mind there is no actual mechanism within European Monetary Union for a country to leave, so we’re in unchartered territory already.
The bad news for those bored of reading about Greece is that this is going to linger on. The weekend will see a referendum occur where they have the option to accept different bailout terms, but of course the PM and government are against the acceptance of those terms. Over the coming weeks, Greece has some payment deadlines to meet, with EUR6.5bn due by July 20th for bonds and treasury bills. If by that point, they are still defaulting, then we could be looking at a resolution of sorts, with Greece leaving the Euro.
Overnight, the panic across financial markets kicked in with stock markets across the world taking a hit with the Dow down 1.95% and S&P 500 down 2.09%. The FTSE was also down just under 2% whilst major indices in the Eurozone country took a huge hit, France and Germany’s benchmark indices down 3.74 and 3.56 percent respectively. Perhaps to many the surprise was the Euro ending the day almost 3 cents higher from the start and even ending above the Friday close at 1.1162 against the USD.
Outside of Greece, the biggest news of an otherwise quiet day was Japanese retail sales coming out above expectations at 3% compared to the 2.1% forecast.
Today sees a couple of big releases with New Zealand’s ANZ Business Confidence released at 04:00 GMT 3. The previous number was well below the April read at 15.7 compared to 30.2, so we’ll be looking to see if that was a blip or a more concerning trend.
Impacting the GBP is the UK current Account release at 11:30. This is forecast for -23.7B compared to last month’s 25.3B. At the same time, Final GDP will be released, but this is expected to confirm the preview release.
10 minutes later at 11:40, RBA Governor Stevens will speak in London and traders will be looking for more sign on the future of the Australian interest rates and slowing economic growth.
Finally at 17:00 US consumer confidence is released. Last month was above forecasts at 95.4 and the forecast is expected to show increasing confidence among consumers at 97.1.
Amid continued flight to quality and safe haven seeking among investors we may see a continued sell off in stocks and investors may look to precious metals to tide them over.