U.K.’s flash PMI indices indicate decline in business activity in November, composite index falls to 47.4
Grexit may not create any major upheavals on FX market
The situation seems to have become more difficult for Athens. One factor pointing towards that is the ECB's decision to leave the volume of the ELAs unchanged at EUR 88.6bn and to raise the discounts of the collateral demanded from the banks due to the changing situation. That will not cause any immediate changes as Greek banks have sufficient "collateral" (in this case usually Greek bonds). It is nonetheless a clear signal on the part of the ECB. Anyone in Athens who had speculated on the ELA loans being increased should take this as a warning.
The FX market on the other hand has become even more relaxed than it has been over the past few months. While EUR-USD reacted with losses of approx. 2 ½ US cent to the end of the negotiations and the announcement of the referendum, the losses were reduced to approx. 1 cent after the "no" vote. Moreover the losses were not sustainable. It can therefore be assumed that today's summit of the heads of government and state (starting at 6:00 pm CEST in Brussels) which centres on the situation in Greece will not create any major upheavals on the FX market, states Commerzbank.
"A Grexit would help Greece to get back on its feet quickly as the country would benefit from depreciation is therefore very questionable. It is more likely that the new drachma will remain no more than a parallel currency. Anyone who recommends the Grexit as a feasible option for Athens does not seem to have considered this yet", according to Commerzbank.