Global macro overview for 06/07/2015 - post-referendum EUR/USD situation

In a truely democratic way, people in Greece voted last Sunday not to accept the recent proposal from their creditors (61.3% to 38.7%). The next day, Greek Finance Minister Varoufakis resigned in order to make EU-Greece relations even easier, trustworthy and constructive. The inital reaction of the capital markets was a heightened risk aversion as the most of the equity markets opened in the red and EUR/USD rate has hit the levels last seen a week ago. The ECB Governing Council will meet again on Monday to discuss the Greece's rejection of the bailout. The current situation reduces the possibility of a successful decision between Greece and the three main creditors (ECB, IMF and EU).

The financial markets' response to the latest fundamental news were somehow muted as the EUR/USD rate managed to cover all the losses since Friday's close. The expected contagion to the other eurozone markets form Easter Europe (Hungary, Poland) and EU peripheries (Italy, Spain and Portugal) was been limited so far as well. Nevertheless, the financial market participants are reducing their exposure to Greece, as the deteriorating Greece economy and the lack of a mandate to leave the Euro would suggest the worst case scenario (Grexit) is still on the table. Traders and investors should expect the risk aversion to remain heightened until any constructive output from Greece.