Greece’s parliament will say ‘yes’ to an austerity package, says Ray Attrill of BNP Paribas, a decision that will push the euro-dollar up towards the 1.45 level.
The euro was holding at 1.43 against the U.S. dollar in early Asian trade on Wednesday, after getting a boost overnight on hopes for a resolution to the Greek crisis.
"I still think that there will be a pretty significant relief rally if we do get that ‘yes’ vote," Attrill told CNBC on Wednesday. Greek lawmakers will vote Wednesday and Thursday on a five-year package of spending cuts, tax increases and privatizationin order to secure the next 12 billion euro slice of aid in July.
However, the currency strategist warns that a rejection of the austerity package could send the euro into a free fall. "If that happened I think the euro-dollar rate will be heading down into the 1.30s and possibly into the 1.20s in fairly short order," he said.
The euro has been battered in the last two months, falling from 1.489 in early May to 1.407 in mid –June, against the dollar.
The Greek vote aside, Attrill remains bullish on the euro in the short to medium term, expecting the single currency to reach 1.50 and beyond versus the greenback in the third quarter, barring any further shocks from the U.S. economy.
“If, for example, the ISM manufacturing survey on Friday came in sub 50, [fanning] concerns the current soft patch in the US economy is more of a swamp rather than a soft patch, that could generate a bigger soft of a risk-off move and that could actually bring safe haven money back into the U.S. dollar,” he said.
“But assuming we don't get that, and we're not expecting it, I think we can head up partly because the ECB is going to not only raise rates in July but it's going to tighten at a more rapid pace,” he added.