Greece, the last Sirtaki

This time round the reaction in EUR-USD was restrained. Contrary to last weekend the exchange rate eased by only one cent compared from Friday's closing on the Asian market and about half of these losses have already been retraced. 

The risk-off reaction of the FX market (AUD weaker, JPY stronger) has also largely been corrected. EUR-USD volatilities rose but not dramatically so. The FX market is getting used to Greece shocks and that is probably a good thing. 

Last night Greeks danced on the streets of Athens in celebration of the referendum result. The last sirtaki? Over the coming days the Greek government and population is going to undergo a crash course in the meaning of the word "budget restrictions". 

Neither the government nor the majority of the no-voters seems to understand that the referendum not only rode roughshod over the democratic order of Europe. It also makes any further constructive negotiations much more difficult, regardless of Finance Minister Yanis Varoufakis' dismissal. 

Already the first members of the German government are saying that renewed negotiations are "difficult to imagine". Under these circumstances the ECB is unlikely to raise the limit for Emergency Liquidity Assistance to Greek banks. 

Unless a miracle happens it seems impossible that Greece will be able to return to normal operations under balance sheet continuity. Which makes a Grexit more likely despite the assertions of the Greek government to the contrary. That is unlikely to happen without any political jitter, which of course means that increased EUR volatilities are no doubt justified. In the long term the euro should benefit from a rigorous approach on the part of the European institutions, says Commerzbank.