Why Currency Traders Pay Attention to the Greek Debt Crisis

Why Currency Traders Pay Attention to the Greek Debt Crisis

 

The unfolding Greek debt crisis is something that forex traders should start paying attention to. The Greek government recently announced that it would not make a 300 euro payment to the International Monetary Fund that was due at the start of June. Instead it would bundle up all four payments due throughout the month and make a single repayment of some 1.6 billion euros at the end of June. You should expect to see the euro experienced continued volatility as the standoff between Greece and its creditors continues and the possibility that the country would exit from the eurozone remains a reality.

For Forex traders, the key date to watch is June 30 when Greece is set to make its debt repayment. Expect the euro to experience increased volatility as this date approaches. In addition, there are a number of other crucial dates related to maturity of its Treasury Bills and International Government Bonds. While the lack of volatility in the financial markets and the euro in particular suggests that the danger of a withdrawal from the Eurozone has receded since the Greek government remains solvent, this may not be the case for long. Unless it manages to reach an agreement with the IMF and the Euro Working Group to unlock bailout extension, the country will likely run out of cash and be forced to default its debts. In this case, Greece would almost certainly be forced to exit and establish a new currency.

Another significant date is July 19 since Greece is due to make a bond repayment to the European Central Bank. This repayment is crucial since the Central Bank and the Greek banking sector heavily rely on the ECB’s Emergency Loan Assistance program. Funds from the ELA have basically kept the financial system working and if they were to dry up, the banks would effectively become insolvent.

In the meantime, the government will also have to make repayments to Treasury Bill holders. In other to make these payments, Greece will have to raise a significant amount of cash and how it does so, assuming it can, will be the focus of traders monitoring events. Traders will also be looking at the results of Greek debt auctions scheduled to be held on June 10 and July 8 since it would show if markets continue to have confidence in Greece.

 

Content References: http://www.investing.com/news/ , http://www.mtrading.ph/about-us/news/ 

1 Comment

  • A&M Traders

    June 21, 2015

    I think the “300 euro” in the second sentence is a typo?

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