Euro Dollar trade is currently steady at the 1.37-1.38$ range ahead of the EU conference which will take place today. Market focus on EU events will be rather intensive as EU members are expected to try and conclude an emergency funding package to Greece. Although the woes over the Greek swelling debt problem are flouting around for some time, several weeks ago investors focus over the issue has taken a dangerous twist with spreads and Yields over Greek sovereign debt spinning out of control hammering the Euro vigorously against the Dollar and the Yen. Fears over the Greek debt issue have eased a bit in recent days but nervousness is still very much present. Today at the EU convention investors will be eager to see if the EU will be able to sort out a solution for the Greek issue. Yesterday talks have resulted with no decision placing pressure on the Euro and today’s session is considered crucial. The Eurozone has a few members with a swelling debt problem besides Greece among them Portugal, Spain and Ireland. Therefore investors see the upcoming convention as an indicator wither the Eurozone as a whole can reign in on the deficit problem and bring its growing deficit back on curse. A failure might spur fears that the EU is having problem to control deficits and with markets extra-sensitive to risk this could result in another downturn in the Euro debt story with the Euro under pressure and EU members such as Greece Spain and Portugal having difficulty in future funding.
EU GDP just ahead- The EU GDP is also due this week and will be published on Friday. Consensus bets expect a growth of 0.3% QoQ for Q4 against a growth of 0.4%QoQ is Q3.Overall consensus pulls see risk to the downside as the effect of the stimulus has faded in Q4 and Industrial output slowed. Germany the largest economy in the EU and the largest exporter in Europe will gather most of the attention after pulls showed German industrial output fell -2.6%. Investors expect German growth to be rather dented with a pace of 0.2%QoQ. Considering the context of today’s convention a disappointment in German GDP can affect the euro rather strongly. The main issue discussed under the convention today is granting Greece’s sovereign debt, a surprise drop in German GDP will raise the entire debt to GDP ratio prospect for the euro zone and therefore raise the risk for the Euro. Germany is at the forefront of the securitization process of the Greek debt and with Portugal’s and Spain’s debt rescue on the horizon more debt on the German nation might shake the balanced image of the German debt structure, a process which will further impact on the deteriorating fiscal position of the Eurozone.
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