Friday update..Grexit … Rien ne va plus

  • Yes that’s t the call from UK Bookmaker William Hill who have closed the books on a Grexit. They will take no more bets on it happening and who can blame them the way things are going. In Washington Greek Finance Minister Varoufakis may have had more sympathy for what he called ‘ liquidity asphyxiation ‘ . Indeed there is more than enough logic in his argument that Greece cannot continue with its debt load. The trouble and eventually surely the crunch is that EZ rules forbid a fiscal transfer.
  • In any event Greece has suffered another economic set back in the last months and prospects of any budget surplus look slim. Looking at the markets they are beginning to price it in and for all the chatter of a Lehman moment it is too well flagged for that. However , after shocks are another matter and time will tell whether another weak link might fall if indeed there is a Grexit.
  • There are some who believe a Grexit will see a stronger EUR and maybe then yesterdays move back to 1.08 is an indication the forex market will at least take it in its stride. Its been more of a general USD correction and one that I continue to believe may have more to go.
  • The Fed debate on when goes on and just maybe markets might begin to factor out a 2015 rate hike. Europe or the Euro zone is looking like it might have turned a corner so just maybe that parity party will have to wait. A move even back to EUR/USD 1.15 is quite possible first.
Market Summary
  • Forex.. USD corrects with EUR/USD leading the way. A dip back from highs over 1.08 but not much and close to maybe scaring more shorts, GBP/USD is threatening 1.50 ( 1.4975 now ) while the AUD is back at 0.78 and CAD 1.2178. I still favour more of USD correction but don’t have the courage to short it. USD/JPY 118.85 has lagged pushing JPY crosses back up but could play catch up any time.
  • Equities . More red than black in stock markets although the Shanghai index ( up over 2% again) is feeding off Chinese stimulus prospects. Up over 100% in a year it seems the authorities are happy that investors can make gains possibly offsetting losses on a weaker property market.
  • Bonds..German 10 YR. creeps ever closer to negative rates ( 0.075% ) while peripheral yields edged up a little but nothing that seems to concern as anywhere near contageon fears on Greece. US rates remain steady ( 10 YR. 1.8650 % )
Enjoy your weekend.

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