June 21, 2011
As noted yesterday, despite the fact that Greece is arguably in worse shape today than a year ago, there’s been very little doomsaying when it comes to the euro’s value against the dollar. That relative optimism about the euro is evident today as expectations seem widespread that the Greek government will survive a confidence vote. The euro is trading comfortably around $1.44.
But it’s always wise to have a back-up plan.
Deutsche Bank strategist Alan Ruskin posed the question in a research note this morning of what might happen should the vote – expected around 5 pm New York time – be a “no.”
Ruskin notes that despite some positioning in the options markets for a doomsday scenario, “for all the talk about tail risk, there is still very little sovereign risk premium priced into current euro/US dollar spot” price.
“A no vote could see a kneejerk retest of the recent cycle low at $1.3970 as a first, not last stop,” Ruskin writes.
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