Markets remain in limbo over Greece

15.16 AEST, Friday 25 May 2012

Markets remain in limbo over Greece

By Tim Waterer (Senior Trader, CMC Markets)

Financial markets remain in limbo over the outlook for the EU and indeed world economic conditions, which is serving to stifle all but the most defensive assets. Currency market flows are still heavily slanted the way of the low yielding Greenback, while the Euro is left to flounder with so many unenviable outcomes possible in relation to Greece.

The difference of opinion among EU leaders has a ‘too many cooks spoil the broth’ appearance which is acting as one gigantic constraint on financial markets at present.

Traders are still looking to distance themselves from commodities while ever the proposition of a disorderly Greek exit remains on the radar. With traders on tenterhooks over growth prospects, the oil price will be subject to further downside risks in the lead up to the Greek elections. US Crude Oil will be doing well to keep its head above the $90 level over coming weeks in the absence of a co-ordinated EU effort on Greece.

The Australian sharemarket started off the day with good intentions, however the familiar theme of grief-over-Greece swept the index into negative territory in afternoon trade. With traders still on high-alert status over the global growth picture, our mining and energy stocks in particular remain a source of fragility for the local index.

The bleakness of international economic data on display in the last 48 hours is suppressing the Australian Dollar which is unable to make any great strides against the US Dollar. The 0.9650 to 0.9870 range looks to be in play while the market awaits a material result on a potential Greece-exit. In short, the AUD will only start to make its way back towards parity when equities and commodities move higher which will signify a resumption of confidence and a lower buying appeal for the Greenback.
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