Greek banks will be closed until Tuesday, 7 July as part of capital control measures announced last night (28 June).
Greece’s creditors were forced put forward a fresh set of reforms over the weekend after European officials rejected the Greek government’s proposals on Friday (26 June). With neither party willing to budge on reforms, Greece’s Prime Minister Alexis Tsipras has called for a deferral of Tuesday’s €1.6 billion International Monetary Fund debt repayment. He also announced a surprise referendum on 5 July to decide the next course of action.
As the risk of a Greek default looms, the euro has plunged against the US dollar. EURUSD touched a low of 1.0981 before recovering slightly to 1.11, where it is currently trading.
The European Central Bank has also refused to extend bailout loans and emergency liquidity assistance to the Bank of Greece. With political uncertainty now the only certainty until the referendum on 5 July, traders are likely to continue using the US dollar as a safe haven until the curtain comes down on the Greek drama. Bank shares across Europe are taking a hammering – perhaps a hint of the wider consequences for the Eurozone as a whole should Greece leave the union.
Sterling enjoys mixed fortunes
Sterling has also dropped against the dollar as investors flock to the Greenback and GBPUSD currently trades at 1.57. Over the weekend, however, GBPEUR touched highs of 1.43 before scaling back to the 1.4185 mark.
The week ahead
On the economic calendar from the Eurozone, consumer and business confidence numbers and German inflation data will provide interim movement for the euro. Economic data from the UK comprises of consumer credit and mortgage approvals data. From the US, pending home sales data is due, as is the Dallas Federal Reserve’s manufacturing index numbers.
The situation in Greece continues to have markets very cautious and is likely to set the tone for the rest of the week.