This is Thursdays review of proceedings so far this week. I say proceedings but in the case of the Euro and Greek debate it is more a case of non-proceedings.
The Greek Finance minister came to the able not insisting as once indicated on debt write -off but on negotiating a creative debt reconstruction.
The ECB have firmed up their opposition and now say ‘ it is impossible to assume a successful conclusion of the current Greek program’ and issued a statement that they cannot use Greek (sovereign) debt as collateral for loans.
The Greeks have replied by confirming their use of ELA, emergency lending procedure which they used in 2012. In this way the ECB decision will not cause a bank crises.
This promises to be a lengthy tussle with unpredictable market reactions.
Forex Spikes
The Forex saw some nasty spikes this week, as the Euro rallied through 1.15. Without any obvious fundamental signs short covering was the explanation but there is no doubt that as announcements and decisions come out of the ECB and Greece the market will make a response.
Prepare for more. On a daily perspective the Euro USD is ranging between 1.13 and 1.15.
The other major catalyst for the big moves on Tuesday was the rally in oil. As US producers slow down due to the price squeeze and the major companies continue to suffer the consequences, there was a strong sentiment in the market that oil had bottomed out and that the supply would now begin to tighten.
The rally that began on Monday extended to 54 by the end of Tuesday’s trading but now suffered a rapid fall back to 48. It currently trades around 49.60.
Perception’s change and the more nervous the market the faster they do so. It may well be that traders sees the slow down in production taking a good while before inventories are affected in real terms.
This was bourn out by the the US crude inventories number on Wednesday confirming another increase to the highest level in 80 years.
The S&P having had a robust rally in the first 2 days of the week, clearly displayed the jitters from both these events, but has resumed the rally recovering ground in this mornings trading.
The same effect in the Euro bourses, with the DAX giving back some of its earlier gains.
A reminder of Non-farm tomorrow in the US, so keep away or tighten stops. It will be potentially the third catalyst in another busy unpredictable week.
Judith Waker
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