As the euro zone continues to scrabble to fix the Greek debt crisis, analysts have started fretting over whether Portugal may fail to manage its own cripplingly high borrowing rates. But there are great babies being thrown out with the bathwater.
Crude oil price is once again being held capture to geopolitical tension surrounding Iran’s threats of the shutting down the Strait of Hormuz. Saber rattling intensified from Iran as the U.S. and the EU begin boycotting Iran’s energy exports as trader watched the premium for oil climb.
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.