All eyes remain firmly fixed on the prospects of an agreement over Greece’s debt package, as the repercussions of a ‘grexit’ (a Greek exit from the Eurozone) will be considerable. Going into the trading day, European markets were cautiously positive that a deal to end the Greek economic crisis could be only days away, despite the somewhat cautious response of Eurozone finance ministers.
CMC Markets was similarly sceptical, pointing to the fact that 8,500 business have closed in Greece since the beginning of the year, and that the Greek government’s proposal to increase taxes is not going to solve long term problems with the economy. “A number of key questions also remain, including as to whether the proposals put forward go far enough to satisfy all creditors, including the IMF, but if they are ratified, they need to be done so in time for Thursday’s leaders summit,” CMC commented today.
Bernard Aw, an analyst with IG in Singapore, also pointed out that regardless of the ability of Greece’s prime minister to hammer out a deal, an agreement would still need the approval of the Greek parliament, still dominated by the anti-austerity Syriza coalition.
City Index pointed to the performance of the EUR in the last 48 hours, which has been nowhere near as buoyant as European stocks. This could be an indicator that the happiness of equity traders may be premature. City Index said traders were reluctant to increase their bullish bets near a technical juncture between the 100 day moving average and a short term resistant level in the Eurostoxx at 3575-3590.
At time of writing, the Eurostoxx was close to a daily high of 3649 and up over 5.5% on a week-on-week basis. The EUR, meanwhile, continued to decline against the USD. At lunchtime today EUR/USD was 1.116.