A historic day in Europe beckons today as it will decided whether the Greek Prime Minister, George Papandreou, will remain in office. Papandreou is facing a confidence vote over his handling of the bailout plan. Failure to endorse his position is in a sense opposition to Greece cooperating with the bailout plan, at least in the short-term. Failure to cooperate with the bailout plan will cast serious doubt on outside funding which would place Greece is a position where it has a very real chance of bankruptcy.
The question remains as to whether or not the full extent of the Greek crisis is already reflected in the value of the Euro vs. other cross currencies. If you are a fundamentalist that believes in market efficiency, then you make well believe that more bad news out of Greece cannot have a significant impact on the Euro. After all, how much worse can things get? If, however, you believe that markets are inefficient and over-react to such news, then considerable fluctuations in the Euro are possible.
We at FX Strategy prefer to wait for significant evidence either way before moving into or out of a position. Our position is that we believe that the issues in Europe will continue to put pressure on the Euro. See our Euro Video which focuses on both the USD/EURO and AUD/EUR for more information. Until a decision is made in Greece we will all watch from a far (i.e out of the market).
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