10.05.11

Decisive Week for Greece, Euro at Risk

The Euro has been shaken by numerous problems in the last month. The situation in the Eurozone becomes worse each day and the Euro has problems holding on to its counterparts. The beginning of this month has turned out to be just as bad for the Euro as the previous month has been. This is due to the sovereign debt crisis and especially to the situation in Greece. The week to come may be one of the most important ones in the evolution of the European currency as it is expected for the situation in Greece to come to an end at the end of the week, most likely a bad one. Concerns have grown even more after the moment yesterday when it has been announced that Greece has not been able to meet its deficit limit. The country is likely to face default in the immediate period and this could trigger the Euro down with it. The further evolution of the European currency is to be established based on the evolution in Greece and on the result of the monetary policy meeting of the European Central Bank which is to take place this week.

One of the most important events which now affect the trading market is the announcement according to which Greece has failed to reach the budget deficit which has been imposed by the European Union, the European Union’s Central Bank and by the International monetary Fund. This deficit limit has been imposed by the institutions stated above as a requirement for Greece in order for the country to be able to receive the next portion of the bailout. The difference is rather big as well, as the Greek budget deficit is, at the moment, at the level of 8.5 percent, while the limit imposed by the European officials has been that of only 7.6 percent. Based on these facts, the Finance Minister of Slovakia stated that Europe should better prepare for a default in Greece. On the other hand, there are some German politicians who declared that Greece is, at the moment, practically bankrupt.

On the 4th of October the ECB policy meeting is going to take place. At the moment, there are plenty market analysts who consider that the EU Central Bank is going to decide cutting the main interest rate by 25 or 50 basis points. There are others who think that the interest rates are going to remain unchanged, which would increase the size of bond purchases, measure which is known as quantitative easing. Both these decisions will have a bearish effect upon the Euro.

There are lots of speculations concerning the evolution of the European currency at the moment, but we cannot rely on neither as we still have to see the direction the Euro is headed after. The situation will continue to be tensed up to the moment when the results of the ECB policy meeting are to be made public and to the moment when we are to know in which direction is the situation in Greece going to head next.

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