Late on Friday Greece and the Eurogroup agreed on a 4 month bailout extension. So that clears everything up then right? It is about as clear as mud leaving the market far from impressed. The often used term “kicking the can down the road” is back in play. First off no specific detail has been agreed so that provides another potential breakdown over debt negotiations at some point.
Greece need to provide a list of bailout conditions on today then the Troika (EU/IMF/ECB) need to approve said conditions and once that’s done then Greece and the Eurogroup use that as a starting point for reforms. Then once they’ve started that they’ll take the next steps to a broader based agreement. It’s like the phrase from that 80’s advert, ‘on and on like Ariston’. Never ending. So, there’s no "Grexit" for now although there is still a possibility, albeit a lot less than there was. I’m glad that’s all cleared up then.
What will all this do for the Single Currency? Greece will remain in the Euro I would imagine although I’m not sure if Germany cares one way or another if they were to leave. The EUR is decidedly weak at the moment and with the continued uncertainty around Greece and that still being the main story I think there will be volatility this week. I will say I expect some EUR strength on the back of the ‘agreement’ bringing GBP/EUR down. If you’re a buyer of EUR please consider locking in on a SPOT basis at current levels. Please send me an email to discuss. Over the next couple of weeks I would expect to see some bouts of EUR strength bringing EUR/USD back up to around the 1.15 level. 1.15 will be a resistance level for EUR/USD and should this not be broken then expect to see a downside move back towards 1.10.
I expect GBP/EUR to settle around 1.32 end of the year although over the next few months we will range anywhere from 1.31 to 1.38 on GBP/EUR dependent on the Greece story. That is quite a significant range so please do have a strategy in place should you have a EUR exposure. As I keep saying, doing nothing is speculating.
GBP/USD? I don’t think we’ll see 1.55 this week. We’re more likely to trade to the downside on Cable. If you’re a seller of USD I would suggest looking at market orders to execute on the way down. We have Janet Yellen of the Fed speaking on Tuesday and Wednesday and this will impact the direction of the Dollar this week. If you need to purchase USD before the end of the month I would suggest doing this at the start of the week prior to Yellen’s testimony to the Senate.
We are scarce on data out of the UK this week until Friday when we have the GDP (Q4) figures released. Prior to that news is dominated from the Eurozone and the US this week. I expect some significant movements this week on an intraday basis so market orders may prove extremely useful for you. We can implement an ‘OCO’ for you so it provides you with downside protection whilst allowing you to benefit from upside should the market move in your favour. Please contact me if you would like to have a conversation on a strategy that works for your own individual requirements.
Have a great week and any questions or comments are welcome.
Written by Liam Alexander