This morning the negotiations between Greece and its creditors finally concluded with a conditional deal including a new set of actions to be taken by the Greek side to get agreement on a new ESM programme.
Greek authorities have until 15 July to legislate a wide set of measures including VAT reform and 'sustainability of the pension system'. The creditors demanded these actions due to a lack of trust in implementation on the Greek side.
We expect Greece to implement the reforms required for a new bailout package and get a third programme. Tsipras is selling the deal as a win and putting focus on the things Greece has got - and not the conditions.
Based on this we believe the risk of Grexit is reduced for now. This also reflects a softening by Merkel of her stance this morning as she said 'there is no need for a plan B'. Grexit talks could return if future programme assessments are unsuccessful.
We expect a relatively muted market reaction across FI and FX markets. Market sentiment improved substantially going into the weekend as the prospect of a deal improved and therefore much was already priced in. Expect any rally in EUR/USD to be short-lived and Scandi FX implications to be limited.
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