Market commentary: Polls show close contest in Greek referendum

Greek voters are almost evenly split heading into a referendum in three days which could be pivotal in determining the future of the Hellenic Republic as part of the Eurozone.

A poll conducted by euro2day.gr said 47 percent leaned toward a “yes” vote, an approval of further austerity and the international bailout. The “no” vote, rejecting the terms of the bailout, was 43 percent. The margin of error in the survey of 1,000 people was 3.1 percentage points.

The market, as well as the Greek public have been receiving several mixed messages with regards to the significance of the referendum itself and what the Greek Prime minister Tsipras has in mind after pitching for a last ditch negotiation effort which sent markets rallying yesterday, interpreting positively the reconciliatory tone.

Politicians across Europe were enraged about Tsipras’s strategy; after he called for a “no” vote in order to improve his leverage. Finance minister Varoufakis said this morning that should the “no” vote succeed he will resign from his post.

In the meantime banks remained shut for a fourth day and Greek media have begun to speculate that deposits will be seized to bolster their finances.

The European Central Bank maintained its emergency support for Greek lenders following Greece’s failure to repay $1.7 billion to the IMF. The cap, which was frozen after the referendum was called, was kept unchanged. With Greeks limited to daily withdrawals of 60 euros, the decision by ECB policy makers gives the country more time for a political solution to succeed.

Sweden’s central bank lowered its main interest rate deeper into negative levels and expanded its bond purchases to the end of the year as the turmoil in Greece raises the spectre of further krona gains. 

Swedish policy makers have unleashed unprecedented measures this year to jolt the largest Nordic economy out of disinflation. They were forced to respond after record stimulus by the European Central Bank threatened to drive up the value of the krona and further hamper their fight to bring back price growth, which has been near zero since the end of 2012.The krona slumped as much as 1.1 percent, and was down 0.66 percent to 9.3262 per euro as of this writing.

On the other side of the pond, U.S. data is improving and pushing U.S. yields higher and making the dollar more attractive, currently trading close to its recent lows at USD 1.10 / EUR.

Data flow in Europe yesterday was centred on the manufacturing PMI reports where we saw no change to the final Euro area reading for June at 52.5 (a 0.3pt improvement from May). There was likewise no change for Germany at 51.9, while France’s print was revised up a modest 0.2pts to 50.7. Readings for the peripherals were slightly softer than forecast however. Italy saw a 0.7pts fall to 54.1 (vs. 54.3 expected) while Spain fell 1.3pts to 54.5, well below expectations of 55.5. There was unsurprising weakness in Greece meanwhile with a 46.9 reading, down 1.1pts from May. In the UK the reading fell 0.5pts to 51.4, surprising the market after expectations for a rise to 52.5.

This article was issued by Simon Psaila, Trader / Analyst at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri & Co. Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.