From a Morgan Stanley FX Strategy note, some thoughts on what a Greek exit from the euro would mean … (bolding mine):

  • Once one country has left EMU, the currency zone would lose its irrevocability status, implicitly changing its status from a currency union towards a club of fixed exchange rates
  • Financial fragmentation would intensify, not boding well for EMU’s capital market outlook
  • Since foreign accounts hold EUR-denominated assets on an FX-hedged basis, the impact of a weakening institutional status of EMU could lead to an initial EUR rebound should falling capital markets put foreign investors into an unwanted EUR short position
  • Hence, falling EUR-denominated asset prices should see EUR rebounding
  • We play this theme via EUR crosses – EURNZD, EURNOK – but not against JPY and USD

(ps. Note that these are thoughts should Greece leave the euro … not trading recommendations for right now).


  • ahead of Thursday’s EMU CPI release, ECB QE expectations will likely increase further
  • However, bond markets show that QE is priced in
  • On January 14, the ECJ will announce its recommendation for the German Constitutional Court in respect of the OMT. We think that the ECB’s Draghi would have spoken less confidently in respect of implementing QE if he thought the ECJ decision could bear surprises

In case you missed it, this is why the renewed concerns of a Greek exit from euro:

Oh, and this is my silly conspiracy theory about the whole thing (I don’t have a tin hat, I have to make do with an ‘air’ tin hat):