Turmoil in Greece could cement the Greenback as a safe haven currency

US Dollar:

It was a crazed and unusual day for the financial markets. Investor sentiment was delivered a shock by startling developments in Greece’s painful descent into default; but the reaction would not be as straightfor¬ward as one would expect. Taking on its own progression through the day, the action began with news from the European Union’s statistical group that Greece’s initial estimates for its own debt load were low ball figures. Now at 13.6 percent of GDP, this floundering nation is finding itself in an even deeper hole that it will have to dig itself out from. Adding to this burden, the revision to its deficit would draw a downgrade from Moody’s, officially raising the possibility that default and further boosting its cost of financing. What does all of this mean for the global financial markets and more specifically the dollar? The risks to general stability across the speculative markets have grown substantially over the months all while positioning has pushed further out onto a limb. What is needed to curb risk appetite and ultimately lead to an unwinding of this premium build up is a definitive cata¬lyst. If Greece were indeed to fall into arrears, the implications would obviously be dire for the euro; but could also catalyze a credit seizure and market-wide financial crisis. In this scenario, the greenback will be bolstered by its safe haven appeal. And, while some would argue that the United States’ own debt load could encourage an unfavourable slant though sovereign debt risk; the inevitable flight to safety will likely be so aggressive that the dollar will attract funds from overextended emerging markets and comparatively risky advance economies.
DATA: New Home Sales.

Pound:

Yet another round of heavy-hitting economic data from the United Kingdom has crossed the wires with only limited impact on the pound itself. Thursday ushered in a larger than expected increase in mortgage ap-provals through March as well as smaller than expected increases in public spending. However, it is important to put these timely changes into context. Housing is at risk of stalling in a recovery born largely through a lack of supply. More importantly, public debt has soared over time and led sovereign debt risk to dangerous levels. The regular fundamental docket requires a real shock to overcome the stabilizing effect of the upcoming general election. Perhaps the advanced 1Q GDP data can step up.
DATA: Prelim GDP.

Euro:

How much more convincing do policy officials need that Greece is on the path to default. News today that the nation’s deficit-to-GDP ratio is 0.9 percentage points higher than originally reported at 13.6 percent and could further rise an additional 0.5 percentage points has further added to a burden that had already seemed insurmountable. Before this announcement there was doubt that the country could rouse the necessary funds to fund its debts while riding out a probable recession to meet the necessary austerity cuts to meet the EU’s condi¬tions for accessing loans. The hole is now even deeper and Moody’s has subsequently reduced Greece’s Sov¬ereign credit rating to A3. Fortunately the ECB announced changes to its collateral rules that prevented such a change from preventing the country’s ability to access liquidity from the central bank. This will only lengthen the long, hard road to recovery; and the economic and social impact this will have will not likely be tolerated.
DATA: German IFO Business Climate.

AUD:
The Australian dollar fell around one percent overnight against the Greenback after the Australian Re-serve bank suggested the pace of rate increases could slow from here on.

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GBP/USD	1.5369
GBP/EUR	1.1599
EUR/USD	1.3247
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