Have the Greeks worn Out their Welcome?
Just when the Greeks though they had a deal to get an agreement for the next €120B, some of the Finance Ministers decides the Greeks were failing the austerity tests. Bad habits, we all know are hard to break, but the Greek's adoption of the troika required levels of efficiency and reform were lacking. Debt levels would remain too high, leading to additional bail outs.
The solution for the endless deficits and debt, austerity without economic stimulus, is as effective as was blood letting during the 19th century. Recent economic statistics are abysmal. Unemployment is above 20%, almost 50% if you are in the 16-24 age group, business activity is down, as is the tax revenue. Investment is needed to jump start the economy, but those with capital are finding safer havens. Bunds in Germany, perhaps, or maybe a flat in London.
Yesterday when it appeared the negotiators had a deal, the EURUSD was flirting with the top side of 1.33. This was a level that would have probably prompted more shorts to flee the market. In anticipation of a short EUR squeeze the futures open interest actually went up yesterday. Those same traders are likely today's sellers as the pair limps to the end of week trading.
The chart for this week's trading is interesting. Unless you get a close above the 1.3320 area, that level may be a swing top.
We need to follow the comments coming from Germany and her allies over the weekend. Has the cost of the Greek rescue, and the bleak outlook for this cost to diminish, resulted in an epiphany. Have the Germans decided the Greeks have become a costly, time consuming hassle, and decided a horrible ending is better than a never ending horror.
Should apprehension about a messy divorce between the Greeks and their common currency affiliates prove unfounded, the euro trials are not over. What is going to happen in Portugal, Italy, and Spain? Will the ECB continue to flood the Continent with liquidity, perhaps the biggest example of QE yet?
The riots in Greece, will they spread to other countries when the weather gets nicer? As the elections this spring, are the voters going to option for populism, nationalism or will they stand behind the candidates who support the single currency?
Interesting times we live in. The markets may be quiet over the week end but the forces driving them will continue to evolve.
|
):
Linear Mode
