Markets wary as Greek outcome still unresolved

Tom Tong02/Nov/2011Currency Updates

GBP

After posting poor manufacturing data yesterday, Sterling slipped against the Dollar. Worries still lie in the fragile recovery of the UK, despite showing greater than expected growth in Q3 GDP reading, and this opens the door for more QE come the next rate decision on Thursday. Interest rates are expected to remain at all time lows and no speculation is being made on any rate increases.

Due to the current economic climate in the Eurozone, Sterling has outperformed the Euro in recent sessions and whilst there seems no resolve in the near term due to increasing geo-political pressures from Greece and other nations, it is possible this trend could continue.

With the continued threat of yet another banking crisis, Sterling remains under threat from other safe haven currencies and as such investors should be cautious in their outlook for the remainder of the year.

EUR

With another bombshell dropped on the global recovery yet again by Greece, we now see the real possibility that Greece could default over the coming months. The Greek people have been asked by their prime minister to vote by referendum on whether or not to accept the further bailout package proposed by other EU nations. This level of uncertainty has seen the Euro drop against most of its major counterparts in recent sessions.

With MF Global being the latest scalp claimed in the debacle, questions are now being asked as to whether this could possibly be the relative calm before the storm and the selloff accelerates. Global indices have tumbled recently and without clear resolve from this Greek crisis the outlook remains negative for the Euro and the therefore the global financial system again at present.

The Eurozone leaders and the IMF have set an emergency meeting today, ahead of the G20, to try and rescue the deal that emerged last week. Due to the current situation in Europe and new ECB head Mario Draghi coming to power yesterday, some were anticipating a rate decrease to help the ailing Eurozone nations tomorrow, this was however prior to the current Greek crisis.

USD

With no big decisions likely from today’s meeting by the Fed, the US Dollar is yet again faced with the possibility of further strength and investors look to safe areas to place their assets. As in 2008 and before, some speculators are mulling the real chance of another meltdown and the distinct possibility of further US Dollar gains if this were to be the case.

The Feds press conference later today will shed more light onto their current rate setting cycle and possibility of QE3, but neither of which seem likely in the current climate. The US has posted some relatively upbeat figures of late and seem somewhat encouraging.

More eyes will be closely watching the rhetoric given to the European problems as this appears to be the main catalyst in hindering the global recovery. Companies and financial institutions alike will be very wary in this current climate if exposed to the US Dollar as the possibility of increased strength becomes an ever more apparent scenario.

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Written by Tom Tong

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