Greece- A Monster To Big To Fall?

After a rather wet and windy bank holiday weekend it appears we may now be in the eye of the storm. With little news rearing its head out of the US and UK we may well be focusing purely on what is likely to happen next in Greece. Chances are all talks of restructuring have been thrown out the window so we are now awaiting the EU’s final move. Pound Sterling Don’t be surprised to see sterling tail away today and perhaps into tomorrow. This is mainly due to the lack of economic data that has surfaced due to yesterday’s bank holiday. The only morsel of economic news worth mentioning from the bank holiday weekend is that growth forecasts have been cut by the British Chambers of Commerce. Whilst we expected growth of around 2.3 percent, this prediction for 2012 has been cut to 2.2 percent. Such revised forecasts will be seen as dovish by investors and thus the markets are likely to suffer. Dollar Similar to the UK, yesterday was a Memorial Day bank holiday in the US which meant there was little economic data being released. However, a report released today has stated that home prices fell by the most in 16 months during March. This coupled with an increase in home renters in the market have caused the dollar to fall. With housing making up approximately 40 percent of the consumer price index and a rise in interest rates unlikely, an increase in the number of renters along with soaring gas prices could see inflation soar throughout the rest of the year. Euro The euro gathered momentum this morning, helped by talks of a second bailout for Athens and general US Dollar and sterling weakness. There has been serious debate over the last couple of weeks as to whether or not Greece will require total debt restructuring. However, reports suggest that European leaders are simply going to ‘throw money at the problem’. Furthermore, Germany has once again stepped up the plate. This morning saw the power nation report retail figures came in 3.7 percent above expectation. This has seen the single currency gain quite substantially against the majority of its counterparts. Other Currencies – Highlights The New Zealand Dollar climbed to record highs against its major counterparts on speculation the Central Bank will increase interest rates. This coupled with speculation of a Greek bailout package will increase demand for higher yielding assets that include both the kiwi and Aussie Dollar’s. However, whilst the New Zealand Dollar is performing very well, the Australian Dollar has had its reins pulled back as reports showed their economy probably shrank last quarter by the most in two decades. This was more than likely due to floods that swamped coal mines and farmland.