European markets are trading lower and volume is in full throttle today as traders have enjoyed their long holidays. Headlines have not changed much what they were during the holiday period, but reaction to those news have certainly changed its momentum and concerns about Greece and the possible spill over effects are dominating the trader’s dashboard today. This is the first trading week of the month which means simply higher volatility for the market this week, as we are due number of important economic reports around the globe and this will keep investors on their toes. Therefore, flexibility and adaptability will be the key in making decision if you want to press the execute button on your trading platforms.
Greece is the main focus for today and given that Germans have indicated that they have had enough with the losses, is increasing the probabilities that Greece could actually leave the eurozone, if they cannot achieve their negotiations with the EU and the IMF. This has pushed the euro to its nine years low and the target of 1.15 is looking immensely realistic. The CPI data which is due in Germany today could put more pressure on the currency, as this will provide a more clear indication about the health of the Germany economy which is constantly battling out poor economic growth. The import and export figures for the country are under heavy punishment and hopes are scarce for any improvements.
The question which stands out for investors is how well or bad this year going to be given that on one hand, we have a divergence in monetary policy across major central banks, and on the other hand, we are somewhat looking at the scenario under which Greece could be allowed to exit the eurozone, because Germans are ready to accept the losses. Although, it is extremely naive to even think that such a scenario will not have its spill over effects and the mentality of containing the contingency and considering this as a one off event, will be completely foolish. Enormous efforts and work has been done to save the euro therefore, believing the rumours that some German officials are advocating the concept that Greece could be allowed to leave the eurozone, could send the currency once again in free fall.
Back in the US, the mortal economy, has outrun the last year’s performance however, new cracks have started to emerge in the economic data which are screaming the effects of the absence of the QE. Nevertheless, it may take sometime to grab investor’s attention, but once it is under the radar, I will not be surprised if we do see the chatter of another QE from the Federal Reserve.