Global financial markets have hit a rough spot around the globe this morning as Greece appears as though it will default on tomorrow’s debt payment that is due. Money is flowing freely out of the PIGS (Portugal, Italy, Greece, Spain) and into Germany and Switzerland predominantly. Domestically, Greece has basically shut it’s banks and limited ATM withdrawals to prevent large scale emptying of Greek banks. The Euro currency, and global currencies for that matter, are not much changed over pre-weekend levels as the lead up to this event has basically been built in over the last few months. Unfortunately, this event will probably not be the culmination but perhaps just the beginning of a longer period of turmoil as this may just be the first domino to fall,
Yesterday’s Federal Reserve meeting resulted in a statement that basically said the US will not increase interest rates as much or as fast as previously expected. Not surprisingly, the US dollar fell against most major currencies with the UK Pound Sterling being one of the biggest benefactors, setting six month highs near 1.60 in the process.
The New Zealand currency is in the news again as it has broken below .70 to the US$, making new 5 year lows in the process. It makes a visit to The Shire just that much more affordable right now for anyone based in US dollars. The Australian dollar has fared better recently, though that just means it hasn’t fallen as fast in recent months.
P.S. For those unaware, “The Shire” reference above refers to the re-creation of the fictional place where parts of Tolkien’s “The Hobbit” and “The Lord of The Rings” trilogy took place, as a movie set in New Zealand where they were filmed.
On Friday’s much anticipated deadline, Greece deferred a debt payment due that day, saying it would combine four payments due this month into a single lump sum to be paid on the 30th of June. I guess that means more back and forth for the Euro for the balance of this month. The shenanigans continue.
The Euro is gaining another 1% against the US$ today as Draghi talks up the latest European economic growth (is that an oxymoron these days?) reports in the form of GDP numbers just released. Ever the optimist, he seems to have convinced the currency markets that Euros are worthy of buying again today, continuing a 7% rally off of the March 1.05 low. The naysayers may have their turn in the days to come as Greece faces a deadline for a €300M IMF loan repayment on Friday. How that gets resolved (or not resolved) could set the tone for the Euro for the next little while.