A Greek exit and more on JPMorgan’s dead whale

Will Greece leave the euro? A SoberLook reminds us of a good barometer of market sentiment: Intrade futures. At last look ( the prediction market showed a 61% chance that “a” country could leave. What do other markets say? Let’s look at two key indicators.

1) EUR/USD
Foreign exchange, the largest, most liquid of all financial markets is giving a thumbs-down.The strength of the euro had defied its many skeptics, but it’s now at the lowest it has been since January. At last look it was trading in the mid-$1.2820s. Find the latest charts here.

2) German multi-nationals
You can see the recent weakness of the Xetra Dax here.

Source: http://www.4-traders.com/

And here’s some technical commentary on its next moves. Under normal circumstances German exporters would love a lower euro, but these are not normal circumstances. If Greece leaves, will more of the periphery countries follow and leave only a core of Germany, Finland (and the Netherlands?) behind? If this core managed to get past the initial negative market reaction to these exits, a “new Deutschemark” could rise to reflect its stronger current account position. This would be bad news for exporters.

But as this, and the whole financial crisis has shown, politicians and other leaders are the wildcard. The Wall Street Journal has this take from prominent currency analyst, Marc Chandler of Brown Brothers Harriman:

“The market is beginning to move as if we are at the edge of the abyss, and in the past, as we’ve gotten closer to the edge, policy makers have done something to pull us back,” Mr. Chandler said.

OK, so what does JPMorgan Chase’s trading scandal have to do with this? Some traders have told WSJ the following:

“the CIO unit owned a variety of investments, including European assets. If the group becomes more conservative, it could move to sell these other holdings, putting pressure on those markets, too.”

It would be a particularly bad time for JPM to embark on a fire-sale of European assets. To do so would say a heckuva lot about how worried JPM is about its poorly executed “spledge”.

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• Related story: The eurozone X-factor
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