Uncertainty over Greece continues

Overnight, despite twelve hours
of talks, the Eurogroup meetings proved fruitless as the finance leaders failed
to come to an agreement over Greece’s third tranche of bailout funds.

Although officials praise Samaras’
government for its progress so far, it appears that the divide between rich
Northern euro nations and the Southern nations is showing too far to bridge.
With German elections on the horizon, Merkel was keen to stress that her nation
will not take any debt write downs.

Uncertainty over Greece continues

Overnight, despite twelve hours
of talks, the Eurogroup meetings proved fruitless as the finance leaders failed
to come to an agreement over Greece’s third tranche of bailout funds.

Although officials praise Samaras’
government for its progress so far, it appears that the divide between rich
Northern euro nations and the Southern nations is showing too far to bridge.
With German elections on the horizon, Merkel was keen to stress that her nation
will not take any debt write downs.

This standoff has caused
uncertainty over Greece’s future, and as usual, uncertainty has led to reduced
risk appetite for the riskier euro. As expected we have seen people flood from
the euro into the safe haven dollar as they seek refuge from the insecurity.

Last night in the US, Federal
Reserve Chairman, Ben Bernanke, held a press conference to discuss the fiscal
cliff. Bernanke outlined the potential opportunity that the event would hold,
if congress can come to a suitable agreement. An initial deterioration of the
dollar followed, however following the revelations in Europe this effect quickly
reversed.

Greece remaining within the euro
is still seen as paramount, therefore an underlying confidence that a
compromise will be found still exists. The current signs of weakness could
represent an excellent time to buy euros as analysts still expect a solution to
be found. The next likely window for an announcement is in six days’ time, if
one is found then, we could see the euro strengthen greatly.

 

Today’s Key Announcements:

• 09.30am – GBP – MPC Meeting
  Minutes
• 09.30am – GBP – Public Sector Net
  Borrowing: expected to decrease to 4.1bn
• Tentative – EUR – German 10y Bond
  Auction
• 13.30pm – USD – Unemployment Claims:
  expected to drop to 415k from 439k
• 14.55pm – USD – Revised Consumer
  Sentiment: expected at 84.3