Greek Tragedy

16 June, 2015

Matthew Boyle

As the Greek situation continues to play out it is becoming increasingly more apparent that it is this situation as opposed to economic data which is largely driving rates at present. European policy makers have raised pressure on Greece urging them to return to the negotiating table and make concessions in order for an agreement to be reached. With clear signs that talks are stagnating many high ranking Euro officials have publicly raised the prospect of Greece’s exit from the Euro, as Greece stated it has reached the limits of its ability to make concessions.

As a result and perhaps rightly so investors are increasingly concerned and yesterday saw all of the Worlds stock markets were in the red as risk appetite seems currently low. Athens now has 2 weeks before it faces a 1.6 Billion Euro repayment due to the IMF, which could potentially leave it out of cash and with nowhere to borrow from – therefore dangerously close to a Euro exit. It has been suggested that if Greece do not return with concessions that the Eurogroups stance could be “take it or leave it” so it would seem things behind the scenes are reaching fever pitch, whilst in the market investor sentiment has left it for the time being stagnant.

As we have seen over the past few weeks this has been an on, off, on, off type situation so certainly nothing is final as yet. After the initial news of the default rates pushed up to a 7/8 year high, falling around 7 cents to the rates we saw last week when it was suggested an agreement was reached. As we sit now the rates are firmly in the middle of this range, and with investors seemingly scared stiff at present it is unlikely we will see much movement until the conclusion this tragedy becomes clear.

Should an agreement be reached we can expect rates to quickly drop by 2/3 cents, however if as the rumours suggest Greece will leave the Euro the reverse will likely happen – a gain of 2/3 cents. Those of you with a gambling type mentality may in fact welcome this scenario, however those more risk averse may well wish to take advantage of rates now as they sit in the middle of the road and are still above levels not seen since 2008. Particularly if you buy in to the idea that the ECB and IMF simply cannot allow Greece to leave.

It is no-doubt a highly volatile and unusual time in the market at present with economic data taking a back seat whilst the ECB, IMF and Greece hold the key to rates and market movements. If you have any upcoming transfers to make stay in close contact with your Currency Index broker for some friendly and professional guidance on your transfer. You may like to consider placing a limit/ stop order to make sure when your rate becomes available it is instantly secured, as when the outcome of this situation is announced we will no doubt see a very quick movement in rates – so don’t be caught out. Currency Index can help you stay well informed and well ahead of the market.