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Is a Grexit possible?
Written by: PaxForex analytics dept - Tuesday, 16 June 2015 0 comments
As more and more deadlines approach and no deal is reached between Greece and its creditors the likelihood of a Grexit, which stands for a Greek exit from the Eurozone, is becoming a very realistic outcome. Forex traders need to monitor the situation very careful as it will have a big impact on the Euro. Up until now the exit of any Eurozone member was never this close to reality as it is this week. No deadline resulted in an agreement.
The Troika tried to negotiate what Greece called unrealistic demands and the International Monetary Fund (IMF) left Brussels after no deal was reached. This was the latest sign that a deal is highly unlikely to be reached as Greece is running out of cash. Hardliners on the political left in Greece call for an exit of the Eurozone and a return of the Drachma which may be outcome of the Greek drama as even Germany is warming up to the idea to cut its losses.
One of the biggest questions about a potential Greek exit will be the impact it will have on the Euro. Greece is viewed as a drag on the Eurozone with crippling
debt, a multi-year recession as well as high unemployment. Some analysts will view a Greek exit as a very favorable development for the Euro and the Eurozone as economic data will improve and the currency will strengthen as its weakest member has been let go.
Others raise the question of other exits by Eurozone members and what type of message this will send to the forex market. It could result in an initial turmoil due to uncertainty about the future of the Euro. It could shake confidence and plunge the Euro until more clarity will be provided. Other countries may monitor the events after a potential Grexit and should Greece indeed come out successful and stable it could serve as a model for other Eurozone members.
Nobody knows what will happen if Greece will leave, but the Euro will remain as a currency. Maybe more countries will leave, but that could also strengthen the currency. Forex traders should expect volatility in the Euro to increase as professional traders will adjust their positions based on news out of the Greek negotiations which can lead to huge price swings. This can also create great trading opportunities.