To be or not to be, will Greece default or not? It is the question on every trader’s mind. Developments over the weekend threw cold water on the prospect that Greece will avoid a default, once again leaving traders disappointed and the euro on the defensive.
A quick update on euro and sterling ahead of the European Union meeting scheduled for January 23. In overnight trading the EUR/USD pushed as low as $1.2889 as traders focus on Greece as the country continues its struggle to strike a deal with private investors.
A few months ago, Finland asked Greece to back up its debt with gold as collateral. The proposal was shouted down at the time, but there are still analysts who think the idea has real promise as a way to save the euro from its current crisis of confidence.
Markets are circulating reports that Standard & Poor’s has warned at least six European countries that their top-tier credit rating is at risk of a downgrade in the next three months.
Look to see overnight weakness in the U.S. dollar and the Japanese yen continue today ahead of the start of the euro zone finance ministers’ summit today in Brussels.
Offering to buy $10 billion in European Union debt is a nice gesture from Brazil that reflects the way the global balance between emerging and developed nations has shifted. That is about all it is, though.
The potential this week for volatility appears to be even higher with headlines from Greece about continued austerity. Even though the proposed referendum on Greece’s membership in the euro zone never happened, traders will still keep watch for any additional indicators.
Once again the U.S. dollar is under pressure as global markets react to media reports that Germany and France have reached an agreement to increase the euro stability fund to 2 trillion euros.
The euro regained the ground it lost against the U.S. dollar this morning, but remains basically flat on threats that France is close to losing its coveted AAA rating.
Lack of faith in the ability of European policymakers to deliver on the “Grand Plan” to solve debt crisis by the October 23 is putting pressure on oil prices around the world.