Strategy Video: The Market Is Underpricing the Risk Greece Poses

Talking Points:

• Greek headlines this past 72 hours were very unflattering, pushing up the risk threat to the Euro

• News that Sunday's negotiations fell apart and officials looking into capital controls show the risk

• Despite the acknowledgement of the threat that Greece poses, the market is still unprepared

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EURUSD and other Euro pairs have entered a period of consolidation - not out of comfort but rather from fear. Investors are watching for definitive milestones in the ongoing negotiations between Greece and its creditors over its quickly deteriorating financial position. The headlines that start off this week offered a familiar disappointment on progress. Sunday negotiations on Greek reforms ended after just an hour while the media started started running unconfirmed reports Monday that officials were looking into capital controls and alternative scenarios to a release of funds to the country. Traders clearly do not want to jump on those unsubstantiated reports, but their inherent skepticism creates a situation where the market is left significantly under-pricing the risks that the Euro and Euro-area financial system faces. We give an update on Greece's troubles in today's Strategy Video.

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