The Greek debt crisis drew the attention of forex markets, particularly of those forex trading with the Euro. By analyzing the key stages within each phase the trader can gain an insight into the Greek factor within the Euro zone and just how much this impacts a possible Euro currency pairing.
A significant trigger within the financial crisis came when Fitch reduced the Greek credit rating from A- to BBB+. The decision sent the markets spiraling and Greece was pushed, though not willingly, to the forefront of forex trading focus. The credit rating decision merged with an increasing pattern of disparity as the Greek leader Papandeou’s Panhellenic Socialist party was unable to regain control of the escalating financial situation. Worrying investors widened the spread between the interest charged on German and Greek debt to 4%. A radical Greek austerity package was required to soothe the financial markets and even this was not enough as doubt continued to ripple through financial reaction.
The package signified too little too late, the markets were unable to alter naturally in the midst of such extensive financial debt. This concern began to seep into other countries within the Euro zone forcing an intervention. The International Monetary Fund and European ministers were forced to bail Greece out to the tune of $45 billion; this in turn becomes a three year package providing Greece with $110 billion. The sheer size of required financial aid was unprecedented and the entire incident came close to scarring the reputation of the Euro.
The context of these events serves the purpose of making forex traders aware of the fact that the Euro is not a single currency but part of a collection of countries. Each country is exposed to its own unique problems and opportunities, a view of the wider picture can at times be beneficial to forex trading.
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