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Greek Protests Bring About a Case of Deja Vu
The image of Greek protestors is an all too familiar sight and brings about a serious case of deja vu to this particular analyst. These scenes are very reminiscent of six months ago, when the eurozone debt crisis was gathering a head of steam and media reports about the collapse of the euro were rife. Since then we have seen multiple bailouts, commitment to the country by a variety of key European figureheads and promises from a new government to bring about the necessary austerity measures to keep Greece in the eurozone.
If the situation was bleak then, where are we now? The Greek people are despondent and rightly so and serious questions need to be asked as to how this situation has been allowed to develop to such an extent. Why has so much money been pumped into Greece that could potentially have been used to support other flagging economies? How did EU leaders not see that the austerity measures being implemented were ultimately going to hamper Greece from meeting those repayments? These questions whilst valid do not tell the whole story and to be quite frank Greece should never have been allowed to get to the point of a possible default, considering that they have been allocated over 200 bn-euro in rescue funds. I can understand why leaders felt it was important to keep Greece in the eurozone, especially since the threat of contagion to other nations was unknown but honestly can they say that Greece as a single entity, or the eurozone as one are better off for it?
When you also look at the problems facing the Spanish economy, after the revelation by The Bank of Spain that the Spanish economy had continued to shrink at a ’significant rate’, you do fear the worst and it does point to further pressure on the euro over the coming weeks. GBP/EUR have actually stayed fairly flat during Wednesday’s trading, with just a small spike for Sterling. It could be that the issues in Spain and Greece have been factored into the market movements over the past few days but also that protests alone do not mean that solutions aren’t possible. Many will probably take that statement with a pinch of salt but Mario Draghi’s recent commitment to Greece and the euro, with his ‘unlimited’ bond buying scheme, in essence should help to protect the eurozone against these kind of fallouts. However, this scheme has yet to be put into effect and as such I will remain sceptical until proven otherwise. GBP/EUR rates continue to move between 1.25-1.26 as the markets try to digest the outcome of these recent developments.
EUR/USD rates have also dropped, with the greenback gaining almost half a cent during Wednesdays trading. This could be a direct result of today’s protests, coupled with investors’ fears that the global economy could come under some pressure again following the problems in Greece and Spain. Usually in times of global crisis investors will move to the USD, which is seen as a safe-haven currency as it tends to hold its value better than other major currencies in times of global economic uncertainty.
This market uncertainty can be difficult to digest, especially if you have an upcoming property purchase or sale and are looking to transfer funds but are worried that market movements will ultimately leave you short changed. Here at Foreign Currency Direct plc we have multiple contract types all tailored specifically towards our client’s needs. One of our most popular types is our forward contract, which allows you to lock in an exchange rate even if you do not have the full funds available. This is perfect for anyone looking to eliminate risk from the market but still take advantage of our award winning rates. If you would like more information please contact me directly at [email protected] or on 01494 787 478.
2012-09-27 05:20:50
Source: http://www.eurorateforecast.com/2012/09/26/greek-protests-bring-about-a-case-of-deja-vu/
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