Abshire-Smith - Analytics

    Abshire-Smith

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    Risk of a Greece Exit from the Euro

    Greece is currently in final talks with Eurozone finance ministers regarding the countries impending bailout. If no agreement is met, then ultimately Greece would be unable to make its debt repayments and default on its obligations. This would then set a painful set of events, as Greece leaves the single currency, with measures such as currency controls.

    The Euro wasn’t developed with an exit plan built in, so the move would have disastrous effects for the Mediterranean country. Monday is a public holiday for Greece, which could be the brief window of opportunity for an agreement to be met.

    Dislocation of Euro pricing                                                         

    In the event that there is an unprecedented exit of Greece from the single currency, Euro denominated crosses would be extremely volatile.  There is a potential that this could happen as early as this weekend, with trading opening in Asia would likely gap. The volatility could be similar to the move seen in EURCHF, following the removal of the 1.20 floor.

    Currency spreads would be significantly wider as our liquidity providers would likely price the uncertainty. This could see trades filled with unusually high slippage, due to the illiquid market. 


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