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Greece back in the spotlight
Publication date: 25 May 2012
Author: Alistair Cotton, Currencies Direct
Yesterday’s optimism which lifted risk assets including equity markets seems to be waning. It’s been another difficult week in Euroland, and we are still no nearer to getting any sort of resolution to the Greek problem. In fact, after a week where Greece managed to keep off the front pages, the next few weeks will probably see the Hellenic republic back in the spotlight as we build towards a second election on June 17. Syriza, the left-wing anti-austerity party, remain front runners and the fear that Greece would leave the Euro once a new Government is elected is continuing to drive large scale withdrawals from the Greek banking system. European politicians will announce a capital injection shortly to shore up the ailing Greek banks, but it is now becoming clear as we’re approaching the point where support for further bail-out funds (official or emergency like the Bank funds) is decreasing rapidly.
With Euro sentiment remaining depressed, the UK GDP number coming in slightly lower than expected received much less attention than it would in normal market conditions. After the announcement yesterday morning, Sterling remains locked in different paths against the Euro and Dollar, as the EUR/USD continues to absorb a large amount of the safe-haven, negative Euro sentiment and looks set to continue to fall. 1.25 still looks to be the key level, with barrier option interest set to be heavily defended into the weekend.
Durable goods orders from the US came in exactly as forecast, rising 0.2% in April. The lack of any surprise kept the Dollar from advancing too much against its main trading partners. But the Dollar remains the best performing currency of the last two weeks and will hang on to that crown as long as the large amount of uncertainty hangs over the markets.
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