The outcome of Sunday’s referendum in Greece on the bailout program showed 61.3% of the Greek public had voted against the latest creditors’ proposal – a much higher percentage than predicted by opinion polls. In a further surprising turn of events, the Greek finance minister Yanis Varoufakis handed in his resignation, citing the “preference” of some Eurogroup participants for his “absence” from the Eurogroup meetings.
There were no signs of panic in the markets as the euro’s fall was limited to 1% when Asian trading opened. It’s been steadily climbing since and was given a further boost from Varoufakis’ resignation. Against the dollar, the single currency rose from a low of 1.0968 to trade around 1.1064 in late Asian session. It also moved higher against sterling at 0.7105 and was up at 135.70 against the yen.
Equities were more volatile though as Asian shares tumbled by around 2% at the open. China’s indices were the exception as they had soared by over 7% after regulators said they would provide margin financing to brokers to reverse the 30% slide seen in China’s stock markets since the middle of June. In addition to the liquidity boost, IPOs were put on hold. However, worries over how the Greek crisis would unfold after the ‘No’ vote pulled shares lower to be up by around 3% in late Asian trading.
In other currencies, the dollar recovered from a low of 121.85 against the yen, which was boosted from its safe-haven status after the referendum result. The dollar recovered to 122.63 in late Asian trade. The pound was weaker across the board as it fell to 1.5546 against the dollar. But the aussie and kiwi managed to turn higher from Friday’s close. The aussie, which fell sharply last week from weak iron ore prices, rose to 0.7511 and the kiwi was up at 0.6690.
The French and German leaders are due to hold talks in Paris on Monday afternoon to discuss the unfolding situation with Greece. While Eurozone leaders are set to hold a summit on Tuesday to start talks on a new bailout program. The European Central Bank will hold a conference call today but is unlikely to change its policy of maintaining emergency funding to Greek banks at current levels.
There was some positive news for the Eurozone as German industrial production figures out this morning showed output falling by less-than-expected by 0.2% in May, against expectations it would contract by 0.4%. The only other major data expected today are for the US. Final services PMI for June, along with the ISM non-manufacturing composite and the Labor Market Conditions Index should attract some attention away from the Greek referendum aftermath.
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