Euro weakens further to 1.3650 on remarks by eurozone officials - FX Solutions Update

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Date: Sat, 19 Nov 2011 Time: 7:29 AM
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Join Chris Advincula, Market Analyst at leading forex trading broker FX Solutions (http://www.fxsolutions.com/), as he provides a report of forex activity and news for 3rd November, including a fall for the Euro.

"The German Chancellor Angela Merkel told reporters, "The referendum will revolve around nothing less than the question, does Greece want to stay in the euro, Yes or No?"

The French President Nicolas Sarkozy said, "Prime Minister George Papandreou's government won't get a "single cent" of assistance if voters reject the plan."

EU President, Jean-Claude Juncker said, "We told the Greece Prime Minister that we are sticking to the plan." He added Greece lost the 8 billion tranche aid. (6:30pmNY/10:30 GMT)

After the harsh ultimatum remarks made by the leading EU officials, the euro fell 30-pips to 1.3720 on the initial reaction, and eased further down to 1.3664. High 1.3755 Low 1.3664 (-91 pips)

The risk currencies followed the move, Australian Dollar fell 144 points from 1.0350 to 1.0206. Sterling fell 85-pips from 1.5960 to 1.5875 while the New Zealand Dollar fell 65-pips to 0.7805.

What was once declared to be an "irrevocable" membership deal from 1999 by the EU founders, these ensuing events proved otherwise that left the door open for a weaker member nation to secede from the eurozone.The polls shows most Greeks object to the bitter pill of austerity measures, yet seven in ten favor remaining in the euro, a survey of 1,000 from To Vima newspaper.

The market is also thin with the absence of the Japanese participants away on holiday, with many participants on the sideline ahead of the G20 meeting today & tomorrow. Dollar Yen is confined to a very narrow range of 17-pips. High 78.16 Low 77.99. Euro Yen is lower following the euro decline. High 107.40 Low 106.64.

One analyst from UBS said while leaving the euro would allow Greece to regain control of the exchange rate and interest rates, the legacy currency, Greek Drachma will be subject to a drop of 60 percent, and local interest rates will at least be 7 percentage points higher (ie: 25% + 7%) imperilling the balance sheet of Greek bond holders.

German banks held $12.4 billion Greece government bonds while France holds about $10.7 billion, according to the Bank for International Settlements.

The EU President, Juncker said that the EU leaders are now working on formulating a plan on shielding the other member countries if Greece were to leave the Euro.

Asian stocks declined on the referendum news. Hang Seng is -394 points to 19,384.70 (-1.77%) S&P ASX is -13 points to 4,171 (-0.31%) Nikkei is closed.

Gold is in the middle range High 1740.00 Low 1723.00. Silver is 75 cents lower High 34.35 Low 33.60. Oil is lower. Dec Brent is -0.54%, Gas Dec is -1.66%"

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