Quant Opinion: Euro faces Armageddon as Greece return to Polls and Socialists take office in France

(Last Updated On: May 18, 2012)

Quant Opinion: Euro faces Armageddon as Greece return to Polls and Socialists take office in France freshbusinessthinking.com

By Jason Gaywood, director at currency specialist HiFX Last ditch attempts to form a coalition government in Greece have now officially failed as the country now faces a re-run of elections next month. Meanwhile, as President…

Eventually there has to be a time when fear starts to turn to complete panic for the Eurozone and that time may be rapidly approaching. Greece has signified that elections have to be re-run in June on the back of its inability to form an acceptable Government but what it will achieve is difficult to comprehend bar it becoming a referendum for the Greek people on whether they exit or stay in the Euro. Someone now and quickly has to take the situation by the scruff of the neck and say enough is enough with Greece having to make, forced or unforced, a hasty retreat from the single currency mechanism and getting back to sorting its own economy out or this will continue to drag on to the detriment of all.
French President Francois Hollande eventually made it to Berlin yesterday afternoon, after his plane was hit by lightning (does that tell us something?) for his bilateral talks with German Chancellor Merkel. They seemingly putting their war of words behind them for now with early indications showing that there was talk about how to resolve the Greek problem and stick with them but how many times have we heard this from European Politicians over the past years?
The Euro has fallen to levels where in reality it should be on the exchanges as the flight to the safe haven status of the dollar, and to some extents sterling on the back of Government stability and its intentions to stick to its austerity measures, inflicts damage on the single currency.
The uncertainties and nervousness in the markets has seen all gains this year on the equity markets being erased as the Eurozone’s problems spread contagion fears into global markets.
German bunds and UK gilts find themselves very much in demand at the moment with 10 year Gilts hitting a 10 year low. Record highs for Spanish and Italian bonds 10 year bonds says something.
Bank of England Governor Sir Mervyn King will be explaining some of the Bank’s recent decisions and activity, or lack of, when he presents the Bank’s latest quarterly inflation report at 10.30hrs this morning along with growth forecasts. GDP growth will probably be downgraded but with the Bank continuing to be restrained by inflation, which now looks unlikely to fall below 3% for the rest of 2012, it is unlikely that the Bank will contemplate another round of quantitative easing any time in the future. Any comments on this will be scrutinised closely by the markets. UK unemployment data is also published this morning at 09.30hrs but as usual a difficult one to predict. But are markets really looking at UK data closely at this time with other issues dominating proceedings. It all takes the spotlight off Cameron as well I suppose!
The FED’s FOMC minutes released early this evening with markets looking to see if US quantitative easing measures are a permanent fixture or just a temporary measure. Another potentially volatile day ahead.


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