Interesting divergence in equities and forex overnight. The news of the Greek bailout is providing no support to the Euro as the currency has now tanked after originally trading 0.35% higher on the Greek bailout news. It’s quite clear that investors are feeling less than reassured about the future of the Eurozone on the back of the bailout.
Updated: The Euro is now trading down -0.75%. Investors were expecting a larger package so surprise over the size of the package could be adding to Euro concerns. Erik Nielsen at Goldman Sachs says the package is not big enough:
“I maintain my estimate that the total financing requirement will be about I maintain my estimate that the total financing requirement will be about €150B over the next three years, so this means that the program will not be fully financed throughout, and that the IMF and EU expect them to regain access to commercial financing probably towards the end of the second year of the program. The program is surely fully financed for the next 12 months.”
As investors digest the bailout news the worries over contagion appear to be steady as Portugal is the obvious next bogey and their problems remain entirely unresolved. Will Portugal come to the IMF with their hands out? Or is this problem now contained?
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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