An emergency Euro Summit, today attempts an 11th hour deal to prevent Greece from defaulting on its debts. Shanghai Composite Index makes a record drop, and world markets try to deal with it all in the face of a looming liquidity crisis.
In the Calendar This Week
China’s Shanghai Composite Index Plummets
China has a bank holiday today. The traditional Dragon Boat Festival commemorates the life and work of famous Chinese scholar, Qu Yuan.
Last week saw a record decline in the Shanghai Composite Index although the chart implies China’s attempt at blowing an epic stock market bubble is far from over. And how could it not be: China has not yet played the quantitative easing (QE) card it holds up its sleeve, waiting, instead, for economic rival Japan’s devaluation of the Yen to set the stage.
The topic of Japan’s aggressive regional trade tactics via Yen devaluation, and China’s potential reaction to it, will be explored in a separate article, since there are more urgent matters at hand.
Greece Credit Default
The world’s calendar, this month, has a big magenta circle around today’s Emergency Euro Summit, called in order to avoid Greece from defaulting on its debt and the risks of a messy ‘Grexit’ for the Eurozone economy and world markets.
The situation has come to a head: either Greece and its creditors will strike a deal, today, or the country will default on its debts.
Since Friday and over the weekend, the European Central Bank (ECB) has been providing emergency liquidity to Greek banks in an effort to ensure that the banking system continues operating in the face of record bank withdrawals. Pre-orders have reached over €1 billion, reports Reuters, and a reported €4.2 billion has already been withdrawn.
In a statement to VantageForex, a Greek banking source said:
If there is no deal on Monday, God knows what Tuesday will look like. Even the ECB is not sure on the road-map thereafter.
Greek Prime Minister, Alexis Tsipras, this morning, handed a new draft of offers for reforms to creditors, who demand increased taxation and government spending cuts in a country where the majority of citizens are either unemployed or being paid reduced salaries.
Speculation is that, in the absence of a deal, Greece may impose capital controls to curb bank withdrawals.
Bank of Greece Governor, Yannis Stournaras, told senior bankers on Friday to expect a “difficult day” on Tuesday in the absence of a deal, according to Reuters.
EUR/USD 1-Day Candle Chart
Global markets are nervous but the consensus seems to be that a Greece deal will be reached. However, the risks and fall-out in the event of a “no deal” verdict may see some heavy selling this week. Bitcoin, being an ideal instrument for value storage and transfer, may well turn out to benefit from the turmoil.
The conditions remind of the situation in Cyprus, 2013, when capital controls were circumvented via the Bitcoin network. The event prompted the University of Nicosia, Cyprus to offer a Masters Degree in Cryptocurrency. As readers know, Greece and Cyprus are neigbours with close cultural ties and many Greeks may have primed their Bitcoin wallets for this day.
Also In The News
RBA's Edwards: Australia dollar still too high ^CA
— FOREX.com (@FOREXcom) June 21, 2015
Royal Bank of Australia Governor Edwards declared in a statement that the Australia dollar is “still too high”, reports Forex.com
The AUD/USD has declined steadily over the past two years from $1.05 per Australian dollar to the current $0.77. The RBA’s strategy is similar to that of the Bank of Japan: devalue the national currency and, thereby, make the country’s exports more attractive.
This analysis is provided by xbt.social.
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