EU Open Report - 29.06.2015

On Friday night, PM Alex Tsipras called for a referendum on Sunday 5 July. The upcoming vote was passed by the Greek parliament on Saturday Night. Greek citizens will be asked “Do you accept the institutions’ proposal as it was presented to us on 25 June in the Eurogroup?” The Greek government is recommending a ‘No’ vote. The government argues that a ‘No’ vote is not the same as a vote for ‘Grexit’. Bank holiday for at least a week, very low limit on ATM withdrawals.

From the ECB:

- ECB takes note of decision on Greek referendum and the non-prolongation of the EU adjustment programme
- ECB will work closely with Bank of Greece to maintain financial stability
- Emergency liquidity assistance maintained at Friday’s (26 June 2015) level
- Governing Council stands ready to review decision
- Governing Council closely monitoring situation and potential implications for monetary policy stance

Euro complex is under pressure after a large gap down, but we're still nowhere near pricing in a Grexit. Seems that the market hopes that the Greek government will come back to the negotiation table. We should continue to be mindful of headline risk. Any sign that Greek government is more willing to compromise will send Euro a lot higher. As we stated yesterday in the weekly game plan, play "hit & run" mode on the Euro this week.

1. Who Said What

 . Greece PM Tsipras announces bank holiday, capital controls, referendum on  bailout July 5, report cash machines running dry, long gas queues – Reuters.

- BoJ not considering emergency liquidity injections on Greece yet – Reuters.

- Japan FinMin Aso – Don’t see further declines in Japan stocks, JPY gains on Greece – Reuters.

- BoJ Gov Kuroda – Uncertainty poses risk to BoJ’s price target, target to be achieved later? April-November ’16 target hit? - Reuters.

- BIS – Global interest rates excessively low, fuels financial-debt-growth instability, policy error risk for inflation-targeting central banks, rising  rates pose new risks for banks, credit-real estate booms raising EM risks.

- Ex-ECB Bini-Smaghi – ECB can give no more liquidity to Greece – CorriereDS.

- China PBOC cuts benchmark lending-deposit rates 25 bps, fourth cut since Nov, reserve ratios cut for some banks to aid rural-small firms – Reuters.

- NY Fed Dudley – September rate hike very much in play – Financial Times.

2. Calendar

3. Asian Equity & FX roundup

PBOC cut rates by 25 bps and cut the RRR rate by 50 bps. Asian equities saying "risk off" on the back of the Greek drama. Shanghai was down 7.5% at one point, now back to -3.5%, Nikkei -1.8%, ASX -1.85% and Hang Seng -1.65%.

safe haven flows evident in FX: Jpy and USD in demand, and Euro hit hard. European tock futures opening with a large gap...pointing to over 5% lower on the open.

I continue to like Gbp longs, Nzd shorts and tactical Euro shorts this week. GbpNzd longs, EurGbp shorts, NzdUsd shorts look interesting in this light.

Good Luck!