And so it continues. Not the rain at Wimbledon but the Greek situation. Yet more indecision, political wrangling, rumour and speculation, leaks – sounds similar to a UK election campaign. All eyes, due to a lack of macroeconomic data out of the Eurozone today, are firmly fixed on Greece as Papandreou’s Government face a no confidence vote. The outcome of this will give us a strong inclination of the next few steps and how the austerity measures will be received. These will be fundamental for Greece to be given the much needed next tranche of aid from the EU.
Should Greece be given more aid? No, they shouldn’t. It’s throwing good money after bad. An economist likened it yesterday to a person going over their overdraft and their bank manager warning them that they needed to make cutbacks to their lifestyle, make some sacrifices with the person nodding, agreeing to do so. In reality, both the Bank manager and the customer know that they’ll be having the same conversation in a few months time. That to me summed up the situation perfectly. We’ll be back where we are now in the not too distant future. Is the Greek economy suddenly going to become an economic powerhouse? Of course it isn’t. The EU doesn’t have an unlimited pot of money for countries and Governments that can’t manage their books. In my opinion its self defeating to hand Greece more funds and we’re just putting off the inevitable; however more funds will be given as the alternative for Europe isn’t viable, at the moment.
I’d expect the confidence vote to come in as a majority which will keep the Euro buoyed for the time being, as was the case all of yesterday. We’ve seen the Euro advance this morning on reassurance to investors that Greece won’t default.
Out of the UK this morning we had the public sector borrowing figure which came in slightly better than expected to give some relief to the Treasury and out of Germany we had the ZEW survey, which measures sentiment, and this came in below expectations. GBP/EUR was largely unaffected.
Existing home sales out of the US is the main figure of note with the EUR/USD pair in focus. If as expected the figure comes in below expectations you should see the bullish momentum continue on the pair. Alternatively, above expectations will give the Dollar some strength however the figure will need to show massive improvement to reverse the existing trend. I’d expect a continual uptick in the pair today.
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