Risk managed to reverse course in the NY session despite continued problems out of the Eurozone and little in the way of resolution on the Greek front. US equities managed to eke out a 0.5% gain on the day on very light volume and this weighed on the US dollar in the latter part of the session. Euro remained the focus in a session otherwise devoid of economic events.
The blame game continued over the weekend as Greek PM Papandreou called the German government to task for not supporting a bailout of the debt burdened nation. It seems that the more things change on this front, the more they stay the same. Here we are a couple of months into this Greek debt tragedy and we have yet to see anything on paper.
Talk of a Greek exit from the Euro is ramping up to an extent not seen until now. The deputy prime minister went as far as to say that without Eurozone support, the Euro will not make sense for Greece. ECB President Trichet threw some cold water on this notion by calling the idea absurd. The common currency managed to bounce back after taking an absolute bath in early NY. Keep in mind that the short-term community continues to favor selling rallies here and a dip back below 1.3500 could be problematic for the longs.
Despite all the talk that Greece doesn't matter in the grand scheme of things, an exit from the Eurozone would still be felt. Many Eurozone banks hold Greek debt because it is relatively cheap and can be used as collateral to borrow at the ECB window. If Greece were to drop the Euro, rates in the country would back up significantly and the holders of this debt would get seriously pinched. If nothing else, a write-down in assets at many of the major European banks would be in order.