News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Mixed
Oil - US Crude
Mixed
Wall Street
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Bullish
GBP/USD
Mixed
USD/JPY
Bullish
More View more
Real Time News
  • RT @KyleR_IG: Restrictions to be eased in Victoria as the state records three new COVID-19 cases https://t.co/i7ED0r6zuP
  • Commodities Update: As of 02:00, these are your best and worst performers based on the London trading schedule: Oil - US Crude: 0.88% Silver: -0.04% Gold: -0.20% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/JOgCXf4qhk
  • The continuity seen across these volatility cycles is a good thing. Historical precedence offer a blueprint for identifying conditions supportive for a vol-event to occur, and how they may unfold. Deepen your knowledge of historical volatility here: https://t.co/vg7w10la3j https://t.co/AeBDanqM4V
  • Forex Update: As of 02:00, these are your best and worst performers based on the London trading schedule: 🇳🇿NZD: 0.19% 🇦🇺AUD: 0.06% 🇨🇦CAD: 0.04% 🇬🇧GBP: -0.04% 🇪🇺EUR: -0.05% 🇨🇭CHF: -0.07% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/LIX3ToP9Bc
  • IG Client Sentiment Update: Our data shows the vast majority of traders in USD/CHF are long at 75.86%, while traders in France 40 are at opposite extremes with 82.70%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/fvWYlP8HEP
  • Dow Jones Retreats Ahead of FOMC, Nikkei 225 and ASX 200 Open Lower https://www.dailyfx.com/forex/market_alert/2021/06/16/Dow-Jones-Retreats-Ahead-of-FOMC-Nikkei-225-and-ASX-200-Open-Lower.html https://t.co/2sjz9ZpHgH
  • 🇦🇺 Westpac Leading Index MoM (MAY) Actual: -0.06% Previous: 0.19% https://www.dailyfx.com/economic-calendar#2021-06-16
  • MSCI #EmergingMarkets Index (EEM), which is heavily weighed in Chinese stocks, has been struggling to breach the 54.97 - 55.34 inflection zone A hawkish #Fed (especially amid ebbing #PBOC liquidity measures), could risk weighing the index Breach under 20-day SMA exposes MAR low https://t.co/4WQED01FWV
  • Knowing how to accurately value a stock enables traders to identify and take advantage of opportunities in the stock market. Find out the difference between a stock's market and intrinsic value, and the importance of the two here: https://t.co/QszmdZFxlk https://t.co/Lt3Z0TODqu
  • Natural gas spot prices have been on the rise, recapturing a key trendline, following the EIA’s Short-Term Energy Outlook. Where can prices head from here? Find out from @FxWestwater here:https://t.co/yK48nZD1ag https://t.co/CPBSrdO485
What Could Greece Troubles Mean for the Euro? Substantial Volatility.

What Could Greece Troubles Mean for the Euro? Substantial Volatility.

David Rodriguez, Head of Product
  • The threat of a Greek sovereign debt default has grown significantly on lack of progress
  • Fears of a default may be self-fulfilling as investors flee Greek banking system
  • Volatility seems nearly guaranteed ahead of critical dates between April 9-16

Greece is fast running out of cash as it negotiates a third bailout with the Euro Working Group, and the stakes are as high as ever ahead of critical deadlines next week. What are the major risks? And why should traders control position size and leverage across Euro pairs?

Volatility Risk is Substantial as Greece nears potential default, exit from Euro Zone

If Greece fails to secure additional bailout, it will run out of money and go into default—likely forcing it to exit the Euro Zone and causing great disorder across financial markets. Estimates vary, but we view the risk of a Greek default high between the period of April 9-16.

Near-term Timeline Highlights April 9-16 as critical Period

April 9 - Greece is to pay 460m to the IMF under terms of first bailout agreement.

April 13 – 1,400m of short-term Greek Treasury Bills mature, forcing Greece to roll over into new debt but clear uncertainty surrounding debt negotiations makes strong investor demand unlikely.

April 16 – Another 1,000m of Greek Treasury Bills mature.

April 9 is a key date as the Greek government is to repay €460m to the International Monetary Fund under the terms of its 2010 bailout agreement. Missing this payment would push the government into default and likely cause great disorder across FX and broader financial markets.

German newspaper Der Spiegel quoted Greek Interior Minister Nikos Voutsis as saying that Greece could skip its payment to the IMF on April 9 in order to pay domestic salaries and pensions. A subsequent Reuters report said that the Greek government denied it would delay its April 9 payment. Uncertainty clearly reigns, and the double-speak suggests recent statements may be pure gamesmanship as it jockeys for a better deal from the Euro Working Group.

But even the threat of default could force a domestic bank run and force the Greek government to institute capital controls in the absence of a larger backstop from the European Central Bank.

Volatility Risk Grows Substantially as Key Dates Approach

The greatest volatility risk in the Euro and financial markets comes from pure uncertainty, and persistent indecision heightens the risks on a daily basis.

Key Risks on Uncertainty:

  • The threat of a Greek default heightens the risks of a bank run as investors flee domestic banks.
  • The European Central Bank currently provides emergency loans to Greek banks but cannot continue to do so in the case of Greek sovereign default.
  • Greece likely to implement aggressive capital controls on the event it defaults in order to keep capital from fleeing the country. Fear of a bank run is self-fulfilling as risk-averse investors scramble to recover deposits.
  • The National Bank of Greece showed €115 billion in assets on its balance sheet as of Q4, 2014, representing over 60 percent of domestic Gross Domestic Product (2013).
  • The Greek economy could enter aggressive recession if financial system fails.
  • Eventually the fear of a bank run could force a Greek sovereign debt default in itself.

What to Watch:

The Euro Working Group—the consortium of European Finance Ministers leading Greek debt negotiations—is reported to have met on April 1, but thus far no officials have commented on results of meeting. The situation remains fluid but we view the potential for headline-driven volatility as especially high.

Greek banks will be closed for a national bank holiday on April 10 and 13, and the bank closures raises the stakes for investors. The sense of urgency is thus especially high ahead of the April 9 IMF payment, and traders should monitor position risks ahead of said dates. We think that this could provide the opportunity for the Greek government to institute capital controls if it sees no alternative to default.

Euro Reactions are Far from Predictable

Derivatives show 1-week Euro/US Dollar volatility prices have risen near-multi-year highs ahead of the key dates, and risks are almost certainly to the downside ahead of a key week ahead. Yet we would also argue that much of the threat has already been priced-in—further EUR losses are NOT guaranteed.

If we get closer to key deadlines without a clear solution, increased risks will likely make for illiquid FX market conditions as banks are unwilling to provide liquidity amidst systemic risk in EUR pairs. In effect this means that the Euro could both rally and fall sharply on any news headlines.

We caught a preview of what illiquid conditions can do to the Euro/US Dollar as it surged by over 400 points in under two hours following the recent US Federal Reserve interest rate decision. If “worse” truly turns to “worst” and the Greek government looks likely to default, the Euro could see substantially larger moves than what was seen post-Fed.

Any surprises could force substantial market moves, and traders should limit trading leverage—particularly in EUR pairs—ahead of the key dates.

--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com

Contact and follow David via Twitter: https://twitter.com/DRodriguezFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES