It’s a day of jubilation and uncertainty all rolled into one for Greek voters today with the national soccer team’s defeat over Russia overshadowed by what could mark the end of Greece and the European Union as we know it. In what is essentially a referendum to the people to decide if Greece will remain under the Euro-Zone umbrella, voters will today head to the polls for the second time after May’s election failed to create a cohesive government. The premise of a global coordinated effort to minimize collateral damage should the anti-austerity vote succeed has provided support across markets with both European and U.S equity markets finishing the week in solid form, nevertheless it remains to be seen just how effective such efforts will be considering the extreme nature of the event. While victory for the pro-euro conservative parities may provide short-term relief and a sense of political closure, it’s clear the economic plight of Greece and indeed the Euro-zone will remain under siege as markets continue to reject Euro-zone leader’s attempts to contain the rot. A majority vote for the anti-bailout Syriza party will be seen as a vote against the ‘austerity-for-cash’ agreement in place, therefore sharply increasing the chances of Greece exiting the Euro-zone – in turn forcing coordinated intervention given expectations of an extreme capital flight to safe haven assets. This is mind, in the absence of a crystal ball the only certainty when Asian markets open for business on Monday is that of volatility.
Most importantly, whatever the Greek election may bring, another week of Euro-dominated headlines is a certainty and will remain a primary directive for currencies. Strength across global equities increased risk currency appeal on Friday with the Euro finishing close to intra week highs, while the Australian dollar has made a sustained break above parity to finish the week at 100.76 US cents, representing just over 1-month highs. Similar moves were noted across commodity bloc currencies with the Kiwi and CAD finishing the week on a solid footing.
Germany’s DAX finished 1.48 percent higher while French stocks outperformed with the CAC closing up 1.82 percent on the day. Across the Atlantic, the S&P and DOW also record solid gains finishing 1.03 and 0.91 percent higher.
U.S stimulus expectations have also underpinned gains, with the recent string of less-than-inspiring economic feedback further supporting the argument the Federal Reserve may soon embark on another round of quantitative easing. The week ahead will see conjecture over U.S stimulus remain a primary theme with the FOMC rate decision on Tuesday which at the very least will see Bernanke and Co keep interest rates near zero while maintaining their ‘exceptionally low federal funds rate through to 2014’ mantra. The health of the housing sector under the microscope with housing starts, building permits and existing home sales on the docket and the Philadelphia Fed manufacturing Index will also be of considerable interest later in the week. Headlining local event risk this week will be Tuesday’s RBA minutes for June and the HSBC Flash China PMI on Friday. Also in focus this week will be feedback from the G-20 meeting in Mexico with will commence on Monday.