The new regime in Greece has, as could only have been expected given its mandate from the Greek electorate, started a hardball game of brinkmanship with the rest of the EU. Germany is up front and centre in the opposition to this. Again, no surprises there. That nation has taken hard medicine itself, especially in the wake of the unification of East and West Germany, is the economic locomotive of the Eurozone, and Frau Merkel and Herr Schäeuble have their own voters to be mindful of.
Evocations of the history that exists between Greece and Germany since the awful events from the middle of the last century, or equating Greece’s situation today with the outcome of the treatment of Germany itself after World War 1, when the so-called Weimer Republic imploded on itself in a blaze of rampant inflation, as are being made in some world news articles this AM, are specious at best. Modern Germany, and modern Greece for that matter, might as well be different planets compared to the situation that existed in the times that are being written about.
The Forex market does what the market does
So, back to the present. As can be seen from the chart at the top, showing the price action in EURUSD yesterday, that pair hugged the safe haven of the 200 period Exponential Moving Average on the ten-minute chart for most of the day. When the news of the early and inconclusive break-up of the Eurogroup meeting started to hit the wires, there was a knee jerk reaction to it, as can be seen. However, the exchange rate is, as of now at least, well within the range at which it has traded since the 25th January last, when it hit a low of 1.11.
There seems to be a feeling in the market place that either (1) the current situation constitutes a lot of posturing on all sides and will eventually be resolved to everyone’s satisfaction or (2) that a Euro without Greece as a member would still be a viable economic entity and would continue on its merry way without the Hellenic member state. The latter scenario has the disadvantage of bringing us into uncharted waters, as no country has ever left the Eurozone before.
And the market, as we all know, can turn on a sixpence.