Greece Asks for Bailout as Wall Street Sent to Room without Supper

Greece has requested the activation of the EU and IMF bailout in what could become the biggest challenge the Eurozone has faced as more countries could enter into the same aid seeking scenario. The risk premium on Greek debt reached 590 basis points and Moody’s has pointed to a drop in the country’s credit rating to a level above junk.

This request by Greece starts the process which still needs euro zone member approval. Germany will be the hardest sell as its Chancellor is facing domestic heat for signing the April 11th deal to bail out Greece. A group of University professors are suing the government on the basis this aid violates the constitution that was agreed by all member states.

President Barack Obama addressed the leaders of the US Financial Industry yesterday. He urged them to stop fighting regulation and join the movement to align Main Street and Wall Street interest. Among those present in the address was Lloyd Blankfein CEO of Goldman Sachs and currently weighing its legal options against the SEC lawsuit.

The US$ is higher in the O/N trading session. Currently it is higher against 8 of the most actively traded currencies in a ‘whippy’ trading range. The USD$ is higher against the EUR 0.13%, , GBP 0.08%, CHF 0.29% and lower against JPY 0.24%, The commodity currencies are a stronger this morning, CAD +0.16%% and AUD -0.92%%. The loonie appreciated after the Central Bank dropped its commitment to not move on rates, which signals an upcoming rate increase. The market expects the RBA to increase rates in their next meeting in May this coupled with the positive corporate earnings reports have boosted the AUD as the speculation of economic recovery continues (0.9214).

Forex heatmap

Crude is lower in the O/N session ($83.58 down -12c). Inventories unexpectedly increased this week by 1.9 million barrels after it was forecasted that they would be reduced by 3.6million. The crude rally is being threatened by OPEC members breaking the agreed production quotas. This coupled with the lower demand for oil. OECD nations have decreased their demand 8% compared to 2006 numbers. US Dollar strength has put downward pressure on oil as the Greek tragedy has a new player in Goldman. The combination of US Dollar strength and US growth weakness paints a negative picture for crude demand.

Equities gave Gold a boost after the metal had touched a two week low earlier last week to offset the effects of Goldman and Greece. Inflation signs around the globe have given Gold ($1,140) some of its luster back as an inflation hedge as the USD$ weakens . Palladium continues its climb at this morning it reached a new two year record level as there is a growing demand from automakers in China.

The Nikkei closed at 10,914 down -34. The DAX index in Europe was at 6,246 up +77; the FTSE (UK) currently is 5,709 up +44 The early call for the open of key US indices is higher.

Note: Dean will be away traveling for the next two week’s and will return to publication on April 29th.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza