Forex markets focused on possible Greece default

Wednesday, Apr 22 2015

With no major data releases from Eurozone today traders are focused on the possible default by Greece with the big Eurogroup meeting at the end of the week. The German government revised up its growth forecast to 1.8% its January forecast of 1.5%. It’s a not very thinly veiled response to some of its critics; it noted that growth would be led by private demand (2% in 2015 after 1.2% in 2014) and projects slower growth in exports – 4.7% in 2015 and 4.5% in 2016. It also does not anticipate a prolonged period of deflation.

The ongoing Greek drama weighs on sentiment. Although some progress is being reported, it still is doubtful that a deal will be struck on April 24. Meanwhile, three-month Euribor, a key benchmark, has turned negative this week, and the implications are being digested. Greek Prime Minister Alexis Tsipras will meet German Chancellor Angela Merkel this week on the sidelines of a European Union summit, as Athens wrangles with creditors over a new rescue package.

Tsipras’ cash-strapped leftist government is under pressure from fellow Eurozone members and the International Monetary Fund to present details of reforms needed to unlock €7.2bn in bailout funds.The European Union has pressed Athens to detail a program of acceptable reforms by Friday, when Eurozone finance ministers are due to meet in Latvia’s capital Riga. But Athens has been resisting reforms demanded by creditors.

The dire state of Greece’s finances was laid bare as local mayors condemned the government order to hand over their reserves to help pay €3.0bn in civil servants’ wages and debt-servicing costs in the next three weeks. However, Eurogroup president Jeroen Dijsselbloem offered a glimmer of hope on Tuesday, saying some progress had been made in negotiations.

Euro was initially pushed higher today, but pulled back finding area around 1.08 handle to be resistive and is currently being traded few points above 1.0750 level. Pair is likely to find support around 1.07 handle and resistance above 1.08 area. Later today, in the US session, Existing Home Sales figures are scheduled for a release.

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