The recent bail out of Greece has had a reviving effect on the market, but this does not mean that there are no longer any opportunities out there to benefit from Contracts for Difference or spread bets.
Firstly let’s look at the deal itself, and this is not very solid. There are three important players in the bail out; Germany, France and the UK. France is in a generous mood, believing that a bail out is necessary to keep the Euro on the road. Unfortunately for Greece, France does not have that much cash and will not be able to bail out Greece on her own. The next player is Germany. Germany is a big player and would not only be able to convincingly lead a bail out of Greece, but would also be able to lead the bail out for at least one other economy.
This leaves Britain. We said before that Britain would be forced to take part in a bail out under Article 122 of the Lisbon Treaty. This is still likely to happen, however someone’s put something in the water and the UK is now starting to play up. The Conservative opposition is making this into a political issue and with an election coming up they sense that the Lisbon Treaty could suddenly become a very handy election issue, in an area where they are on the right side of public opinion. Britain may be forced to help, but Gordon Brown will fight and fight to stop it, and although he won’t succeed he’ll hold it up.
The big, unasked, question is what happens to the other economies that are under serious pressure? These are known as the PIGS, Portugal, Italy, Spain and Greece. Greece is the smallest economy. Ireland showed it had the mettle to make the cuts that would give it credibility, but none of these countries has, yet. And the question will be, why should they?
So what does this mean for the markets? We can’t really give you cast iron tips, but our feeling is that this boiler’s going to blow. Although the Euro will do whatever’s necessary to keep itself together, the strength of the currency will be an afterthought. So if we’d have to give a tip it would be to short the Euro, it’s been strong for a long time – but it’s barely going to care until Greece and the other Mediterranean countries are on the right track.