Does Greece Even Matter to Euro?
Just when you think you've heard enough of Greece, it continues going on and on. The European leaders and their powerful gang are meeting in Brussels today hoping to finally lock down a Greek aid deal. While our news feeds get bombarded with each and every detail on the troubles Greece has, us forex traders are wondering if any outcome is going affect Mr. Euro on the forex dance floor.
Take this week's movements for instance. Greek troubles seemed to be inching towards the finish line on Tuesday, with the headlines generally confident of a deal being done, despite risks that the Greek parliament might not approve their own bailout terms. However we saw a massive drop of Mr. Euro against all his major dancing partners including Ms. USA, British Pound and Japanese Yen.
During today's London session, signs of trouble showed up early in the Eurogroup meeting. Hardliners within Syriza's governing coalition might not want to sign up to a deal that they see as a short term fix which puts them further into austerity without dealing with the root cause of the problem - they may have a point. In a statement the Greek government said that creditors haven't accepted the proposals that Greece made earlier this week.
Markets across Europe instantly fell on the headlines, but did Mr. Euro flinch on this news? Not really in accordance to our expectations. Also we can't be sure if any movements were because of the Greece related headlines as we did have other important economic data coming out of the Euro area, namely a leading indicator of economic health in Euro. The IFO business climate index fell to 107.4 from 108.5 in the previous month.
So here comes the inevitable questions: Does Greece really matter to the rest of the Europe? Some analysts argue that Greece trouble is in fact taking its toll. The IFO survey out of Germany which shows the level of a composite index based on surveyed manufacturers, builders, wholesalers, and retailers suggests that the ongoing Greece troubles are having an effect on the Eurozone as a whole.
Marine Le Pen of France's National Front has been ruffling feathers, as she called last night for a 'Frexit'. Madame Frexit, as she called herself, wants to see a 'cool, calm deconstruction of the eurozone' and says that Angela Merkel "knows perfectly well that if France leaves, there's no more euro". Ms Le Pen will use the UK's in/out referendum to boost her agenda ahead of the 2017 French elections and she's also talking tough on immigration, which seems to be resonating with French voters of late, making her a real threat to the establishment.
So we can argue that even though the direct headlines regarding Greece haven't been moving Mr. Euro as much at the moment as the forex trading crowd may be exhausted by the repeated negative news with no apparent end result, the troubles have an indirect effect on the forex markets.
Are you going to continue to add the Greek noise to your forex analysis tools?