A Roller Coaster Ride

Last week finished with traders perhaps feeling as if they had been put on a roller coaster and trapped. The USD continued its sudden reversal on the EUR as the Greenback gained value quickly. Spurring on this move was not only the choppy commodity markets, but more critically the news that is swirling around Greece. Apparently the E.U. held a meeting on Friday which discussed the Greek Sovereign Debt situation and the rumors that emerged has created a dynamic effect. The possibility of Greece having to restructure their debt now seems like a foregone conclusion. The complications that would ensue from a restructuring of debt would be very large. But that might not be the entire story, true or not rumors are being heard that Greece may be contemplating leaving the EUR. As farfetched as that might sound, in some corridors of financial power some believe it is a real option down the road.

Greece has reacted by denying the rumors of a possible exit from the Single Currency with strong fervor. However investors may recall that Greece also denied that it would need aid last year, it denied that its austerity programs were in trouble, it denied that there was a possibility it would need an additional loan, and it denied that there was any possibility of a restructuring. In other words no matter how absurd the possibility of Greece considering a EUR exit may appear, it cannot be completely discounted. In the meantime the ramifications about a restructuring by Greece will cause poor digestion among those in the investment sphere because there is a likely contamination of other European debt – namely Portugal and Ireland’s. And take into account the exposure that banks will face which hold bonds from Greece.

Thus, the EUR goes into this morning’s trading session facing many questions. It faced an immense amount of pressure on Thursday and Friday and perhaps its value has been brought to a place some investors will consider ‘fair’. But many questions are bound to circulate and it is not a stretch to say that the EUR will see more volatility.

The effect of the volatility in the currencies due to the shadows being cast by Greece will be felt wide. But the commodity markets have also provided fireworks the past few trading sessions, Gold and Crude Oil have been swift. Gold has slightly recovered its footing and as of this morning finds itself around 1501.00 USD. Crude Oil was driven down on Friday and it will have the attention of many investors. While a cheaper Crude Oil price is good for manufacturers and consumers, the nature of the commodity markets and Forex the past few weeks could lead to the belief that the markets have not seen the end of their roller coaster ride.

Today’s economic data will be very light. There will be some retail and housing figures from the U.K., but the crux of the focus will be steadfast on Greece. From the States investors may be ready to discuss the jobless numbers from Friday which were better than expected. However the news that has emerged this weekend from Europe will give pause to investors who went through the economic crisis of 2008 and still carry the scars. The broad markets are nervous and are likely to be very cautious today.

Written by bforex.com