The EUR lost ground abruptly on Thursday as rumors continued to spark around the story that Greece would have to restructure its debt. Greece was quick to deny the rumors. The IMF also came out and said that Greece remains committed to its austerity measures. The problem with all of this is that investors have essentially been down this road before, when Greece initially denied that they were having problems last year paying off their debt obligations. And so a game of who do you believe will likely begin to mount. Greece will present a new fiscal plan today that will continue to outline how it is going to meet their current problems.
Last year when Greece said they would not have to seek out a bailout package from the E.U. and IMF the country abruptly changed direction and admitted they were in fact in desperate trouble. There is likely to be a rather potent debate over the next few weeks about what is in the future for Greece. The Greece question it must be remembered, has the potential to cause a domino effect for the Sovereign Debt story surrounding Ireland and Portugal, and it will more importantly have a huge effect on the banking institutions of Europe – particularly Germany. Greece at this time remains steadfast that it will not have to restructure its debt and there can be little doubt that the European Union certainly hopes they are correct. But is hope enough?
After the EUR lost ground to the USD, something else took place, the EUR actually started to gain again as the day progressed after Greece had delivered its strong message of support for its austerity measures. Equity markets globally continued to turn in rather cautious trading. The JPY continued to gain slightly against the USD. The GBP also gained as the day ended and found itself on the stronger part of its range against the Greenback.
Gold climbed rapidly early this morning, and it did this when China presented their GDP numbers and inflation reports showing that their economy continues to rapidly expand, but is also facing an inflation rate that continues to be higher than anticipated. With questions surrounding Japan, the European Union, and the United States regarding their fiscal stability and the addition that inflation (including China) is becoming a concern Gold finds itself in record territory once again. The question traders may be asking is if it is more likely that Gold will hit 1500.00 USD first or 1425.00 USD first? Crude Oil also managed to inch higher on Thursday and many commodities followed suit as they regained their steady footing. The AUD finds itself solidly near the higher realms of its value as the commodity prices find impetus.
Today’s data will mainly come from the United States with CPI figures and a Consumer Sentiment reading from the University of Michigan. The previous Consumer Reading came in below expectations and it will be of interest to see how the public feels about its own outlook. An estimated reading of 68.7 is anticipated. Industrial Production numbers will also come from the U.S. and the outlook is a gain of 0.5%. The Empire State Manufacturing Index will be published too and its expected mark is 17.1. Thus there is plenty of data from the States on the schedule and this may prove to have an effect on Wall Street.
However plenty of today’s sentiment in the Forex markets is likely to center around the Greek saga. The markets reacted swiftly to the news surrounding Greece on Thursday. The question about austerity and the possibility of restructuring is a dynamic one. The EUR has traded well the past few months and its gains have been for everyone to see. As long as Greece, the E.U., and the IMF insist that the Greek rumors are unfounded and have no merit the EUR could continue to keep its pace. However, if it becomes evident that restricting is really in the cards the EUR will be punished. Short term sentiment and long term perceptions will be the focal points for the EUR going into the weekend.
Written by bforex.com