Allan von Mehren, Senior Analyst at Danske Bank, sees the Greek drama still being the main drag for the single currency, while he expects spot to grind lower.
“The Greek end game will most certainly dominate FX markets this week”.
“In recent weeks we have seen that a widening in peripheral bond yield spreads to core has not been the EUR negative factor it used to be, which probably reflects that aGrexit is not regarded the disaster it could have been a few years ago due to the possibility of the ECB expanding its QE scheme and limiting contagion via the OMT programme”.
“While we maintain that a deal will be struck, there is clearly a risk of this not happening and in our view a Greek default would be a EUR negative as it would spur the pricing of the ECB expanding its bond buying”.
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