The ECB Can Only Lend To Solvent Greek Banks, Hence The Problem…
GBP/USD is currently trading at about 1.5705, GBP/EUR is trading at about 1.4050 as the market opens up this Tuesday morning, with the Euro bouncing back strong from the lows that we saw over the course of Monday session. The Swiss National Bank came out to say that the Swiss Franc was still too strong, even after all the movements that we’ve seen over the course of the past 6-months or so.
The Swiss National Bank is strongly buying the Euro as a result to try and boost EUR/CHF, but also interest rate expectations from the Bank of England and interest rate expectations on the Federal Reserve moving forward, also shifting away from hike in more present times as a result of people saying “are you really expecting an interest rate hike?” as a result of an economy that’s strong enough, but with the Greek exit maybe around the corner.
There’s nothing really too much out of Greece over the course of the past 24-hours, with referendum obviously in view on Sunday. Parties are on one side and the other talking to their electorates trying to get a “Yes” or “No” vote. Both the leaders of Germany and France are also saying that a “Yes” or “No” vote is simply a “Yes” or “No” vote on Greece inclusion within the European single currency, as you can’t get much more higher stakes than that.
The markets are still reeling through the dramatic events of Friday and Saturday, considering the fact that the European Central Bank has declined on extending Emergency Liquidity Assistance (ELA) to the apex bank in Greece above the €89 billion current level. Banks in Greece have been able to keep their doors open because of the Emergency Liquidity Assistance (ELA), thus allowing its citizen have access to cash. The European central Bank has its hands tied on the matter, as it can only lend to solvent banks, but in difficulty. Considering the collapse of talks on Friday, market watchers are betting on Greece defaulting on its loans from the ECB and the IMF, which is due on June, the same day the current bailout is set to end.
It is glaring that the United States and the EuroGroup wish to see Greece stay in the European Union, but it is clearer that the Government and the people of Greece are unwilling to make the structural reforms needed to sustain this. Some of the rhetoric that we’ve seen come out of Greece have been very counterproductive: thoughts that the European Union does not honor the democratically expressed views of the people of Greece would seem to be ruthless combination of the naïve and cynical. The mandate of the people in Greece terminates on the borders of the country – an inconvenient truth that seems to be agreed upon by even the radical left.
Elsewhere, we have UK GDP at 09:30 BST, with the final reading for Q1 expected 2.5{01de1f41f0433b1b992b12aafb3b1fe281a5c9ee7cd5232385403e933e277ce6} yoy, with consumption investment and inventories are likely to be the main drivers of growth, while we see exports which have been particularly poor through Q1 likely to be about 0.9{01de1f41f0433b1b992b12aafb3b1fe281a5c9ee7cd5232385403e933e277ce6} lagged on the overall GDP figure.
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