Is Greece Priced In For Euro Traders?

Is Greece Priced In For Euro Traders?

Financial traders, particularly those who use technical analysis, often caution against betting on the news.

Is Greece Priced In For Euro Traders?
Is Greece Priced In For Euro Traders?

In this case, the question is whether Greece will leave the euro currency. A lot of breathless headlines have been written about the “crisis” in Europe. If you read enough, it starts to sound as though Europe will be in a crisis whatever Greece decides to do, and whatever the outcome of today’s emergency meeting of Eurozone foreign ministers.

So why is the euro currency market so quiet and steady? The euro has meandered sideways in a three-cent range since late January, after falling sharply along with global stock markets. One reason for the relative lack of volatility in the euro is that traders have seen the threat of a Greek exit before, in 2012. However, the situation is not as dire as it was in 2012.

No more PIGS
The European economy was weaker then, with the threat of recession looming and other countries like Portugal, Italy, and Spain also in the same trouble as Greece and also threatening to either leave the euro or drag it down. Remember the acronym PIGS?

This time, in part due to the ECB quantitative easing, partly due to the resurgence of the US and global stock markets, euro traders can make the case that either outcome, exit or stay, can be good for the euro in the long run. In the short-term, most analysts expect a dip, but acknowledge that really, anything could happen.

In short, analysts differ on whether the euro will rise or fall in the short term, but generally agree that Europe is heading in the right direction in the long term. Bloomberg reports, “While Morgan Stanley warned a Greek exit from the currency union may send the euro plunging to a 13-year low, some traders are coming around to former Federal Reserve Chairman Alan Greenspan’s conclusion that ‘parting is the best strategy.’”

When the opinions range between maybe yes and maybe no, but agree on “but it doesn’t really matter either way,” that is the definition of “priced in.” While the euro may spike in one or both directions after the EU finance ministers’ meeting, we may just as well see currency traders letting out a collective yawn.

And that yawn will reflect the real news: Europe is recovering, slowly but nicely. Even Greece is running a primary surplus and can repay its debts given enough time, just as the other “PIGS” can. Moreover, while the anti-eurozone politicians may grab the headlines, the truth is that few Europeans want to continue the blind insistence on austerity that creates inequality and hardship.

Scottish National Party leader Nicola Sturgeon said Monday that before her party would join any coalition, she would require a future British government to end austerity and begin spending to help the poor and middle class. The demand would force the Labour Party to either give up austerity economics or possibly give up hope of forming the next government. That message from the northern part of a still-united United Kingdom is likely to be heard across a still-uniting Europe, all the way south to Greece and the Mediterranean.

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