The primary driver across global markets remained with the Euro-region overnight with all eyes on Greece after finally receiving the stamp of approval on its 130 billion-euro bailout. There’s little doubt the approval of Greece’s second bailout package represents a form of closure to Greece’s near-term ability to fund maturing debt, however many consider this latest effort nothing more than a stop-gap, doing little to address Greece’s faltering economy. While austerity measures put in place provides a long-term plan to reduce the nation’s budget deficit, it does little to assist growth in the region with potentially years of sub-zero growth on the horizon. The trade-off for the new injection of capital is however a cause for concern. With over 20 percent of the Greek public now unemployed, the premise of further austerity in the form of government job losses, cuts to pensions, healthcare and other initiatives – the writing is on the wall concerning Greece’s near term hopes of regaining a sniff of economic composure, in turn there remains a valid case for an exit from the Euro region back to a single currency. A return to a single currency may be shrouded in implications but unquestionably has significant benefits. Greece’s dire fundamentals would promote immediate weakness in a single currency environment; hence a return to the Drachma continues to be a viable option given the significant leg-up it would provide to tourism and both local and foreign investment.
In essence, Greece is one part of the Euro debt equation with Italy, Spain, Portugal and Ireland still in the firing line; however it’s important to consider these efforts do act as a firewall for other economically challenged states from the threat of contagion. The Euro peaked at 1.3293 overnight before selling pressure took over from the initial sigh of relief with price action moving below 1.32-figure for a period. At the time of writing the Euro is buying $US1.3230. Meanwhile, the Aussie dollar succumbed to selling pressure making a break to downside of 1.07-figure and remains near to session lows of 106.53. A$ remains under mild selling pressure with further consolidation expected as markets continue to ponder the fortunes of the Euro-zone. Local data on the bill today includes 4Q Wage cost index with HSBC Flash Chinese manufacturing data the key directive in the local session.