Is a Grexit now more likely? The German stance on paper seems to make the likelihood of a Greek departure from the Eurozone more likely whilst tension mounts between European finance ministers.
Given two opposite options, either throwing good money after bad or taking a risk of a large, potentially unfillable crack forming in the single currency it is understandable that opinions are strongly conflicting. Angela Merkel’s Germany seems to have the opinion that their single currency is less essential to them, or at least there is a price they are willing to pay for the status quo to remain.
Schaeuble and Sapin, the German and French finance ministers respectively had to hold clear the air talks because of the tough nature of the atmosphere in the talks. Schaeuble was reported to have heated words with Mario Draghi saying “I’m not stupid.”
Ultimately, not deal is yet agreed, but Greece is seemingly willing to do whatever it takes – the really want to stay in the Euro. Strangely enough many of the proposals they have put forward and agreed to are those that Greece rejected in last week’s referendum. They didn’t want those deals at the time, but desperation seems to be taking over now – the desire to stay in the Eurozone is trumping everything else.
The Euro opened the week around 60 pips lower but over the first hour has climbed to make back most of that gap with the EURUSD price at 1.1135 at 01:00 GMT 3.
Talks are continuing and now Greece’s parliament has in effect agreed to austerity, a deal is more likely – but the biggest hurdle could still be getting through the German Bundestag – there are senior government officials in Germany opposed to giving Greece what they need.
Other news on Monday is light, with Chinese trade balance figures tentatively expected for release today whilst on Friday the biggest release was out of Canada as the unemployment rate beat expectations sending the USDCAD pair 30 pips lower on the release, although the price rebound and climbed higher again over the next few hours.
Other things to look forward to on Monday will be how the stock markets react to the Greek unrest lingering. German markets were up around 3% on Friday. A lack of agreement could lead to a pullback, but uncertainty in the markets can lead to some surprise movements.