Rise and fall: Grexit talk

Rise and fall
Rise and fall

The potential for Grexit has loomed large over the summer…

Richard de Meo, managing director of Foenix Partners, explains: “The ongoing Greek saga, with its default on IMF debt, staggering political brinkmanship, and bungled repayment deadlines, all coincided with a period of sustained euro weakness. Prior to an agreement being reached in August, however, there were clear signs that the market was tiring of Grexit talk, and traders and investors increasingly proved unwilling to take new positions regardless of the situation intensifying.

“The impact on the euro of a possible Grexit became muddled with strong suggestions that this outcome might actually be good for Europe in the longer-term, leading to counter-intuitive price action in the immediate aftermath of key announcements. As the dust settled, however, normality resumed and the market reaction to Greek developments became more binary – uncertainty spelt currency weakness and that will remain the case going forward. If repayment deadlines are brought into question or domestic Greek politics undermine the bailout agreement, the euro will suffer as a result.”

In the next instalment of our Rise and Fall series, we take a look at tips for managing FX risk…