The Dow Jones newswire is reporting this morning that, while ‘all eyes are on Greece and the Eurogroup’, the reality is that the diverging monetary policy actions between the Eurozone and the US Federal Reserve will be the major driver of the EURUSD pair in the medium-to-long term.
There had been a build-up of short positions in Euro pairs due to an anticipation of the effects of Eurozone Quantitative Easing (QE), which is now a done deal. It appears that major market participants have realised, however, that the Euro is more resilient than thought and those short positions are being unwound, in advance of the June month end, which is also the end of the second quarter of 2015. That circumstance will support the pair, and there may also be a relief rally when an eventual resolution of the Greek question is announced. But all of that is in the short-term.
Crunch time for Greece
The Greek government, the finance ministers of the Eurozone, their political superiors, the IMF, the EU institutions and, it would appear, Uncle Tom Cobley and all, are devoting today to coming to terms with whatever falls out over Greece. The irony at this stage is that even an outcome that would result in the Hellenic Republic no longer having a seat at Eurogroup meetings, in other words being made to leave the Euro, could now be regarded as a victory of sorts for the Single Currency.
This show has dragged on for far too long and everyone concerned outside of Greece is only too well aware that real concessions to Mssrs. Tsipras and Varoufakis would unleash such a storm of copycat actions in all other Eurozone peripheral member states that they would result in something that would be infinitely worse even than the fallout from a Greek default.