Weekly Market Review 17 of December
OVERVIEW

Analysts prepared a few scenarios of the economical and political situation development in the EU. Chances of Greece and Portugal to stay in the Euro zone are estimated around 10%. The most probable scenario is a slow collapse of the EU monetary union with a gradual exit of the problematic a countries, accompanied by weak defaults and weak growth. Because of the obligations’ purchase program of the ECB for problematic countries, probability of the worst scenario for the EU or in other words its uncontrollable collapse decreased to 10%. Almost all scenarios imply the exit of the EU by Greece and Portugal. The probability of them staying in the union is around 10%, as has been mentioned earlier. It is possible only if European officials agree to create a real budget union that implies transfers to problematic countries. Recently the probability of such a scenario was assessed at 15%. The chance of default of Ireland because of its debt grew a lot. Spain will need a full program of aid from the EU, IMF and ECB.


In the worst case (with a probability of 10%) the union will be abandoned be France. Quite gloomy statistics was the reason for analysts to predict negative consequences in the foreseeable future. Developed and developing states decided to double the solvency of the IMF so it can help the EU to fight the crisis. The IMF stated that Europe must continue to reduce the debt burden, undertake economic reforms, and stabilize financial system. Not likely that the EU is going to comply with the suggestions as the main principle in the EU at the moment seems to be  an attempt not to notice the woes in a futile hope that they’ll be resolved somehow by themselves…


CURRENCIES

EUR/USD


The Euro appreciated against the US Dollar from 1.2885 to 1.3173 with a subsequent slide to 1.3155. The growth against the background of the exacerbation and deepening of the debt crisis and approaching recession, was possible due to the issue of positive data recently. Nevertheless analysts assume the growth is temporary and the impact of positive factors will have its effect in the short term only. Technically, after breach of the levels of 1.3000 and 1.3100 the Euro aimed at the ascending range of 1.3340 - 1.3520.  As for the downside the support is at 1.2870. Any failure to overcome 1.3200 might trigger a strong sales’ pressure. Then the rate will be testing the support near 1.2680 with further landing at 1.2660.



GBP/USD

The Pound grew against the US Dollar from 1.6013 to 1.6177 with further recoil to 1.6155. Britain has always been one of the biggest skeptics about the European integration (if not the biggest at all). During the year the controversies only aggravated. In this connection the growth of the Pound after the Euro might end soon and the market will shift from the sluggish purchase to mass sales, the pressure of which one the British currency is expected to be quite strong. The boundary above is 1.6310. The key support is near 1.5820.