Euro Falls as Greek Crisis Enters Crucial Week

The euro fell on Monday as the Greek crisis entered its crucial week. At the moment, the euro lost 0.395% of its value to trade around $1.414 against the U.S. dollar. The European economies are not expected to produce any major data about the heath of their economies today, so all eyes are directed towards Athens, where the Greek parliament is expected to vote on the crucial set of austerity measures, which were set by the EU and the IMF as a precondition for the next tranche of their loan to the Greek government. The opposition has already signaled it will not support the government's proposals. At the same time, Prime Minister Papandreou is fighting backbenchers within his own party. The newest reports suggest as many as four socialist MPs are thinking of voting against their government. At the moment, the ruling Socialists have 155 out of 300 lawmakers in the parliament. The latest rebellion would reduce the government's majority to only one vote, and the crucial vote will take place in a few days time. Therefore, there is still enough time for other Socialist MPs to turn their backs on the government. In spite of massive efforts by Prime Minister Papandreou to save Greece from default, George Soros, a billionaire investor and Forex guru, said over the weekend it seems inevitable that some countries will have to leave the Eurozone. Even though Soros was far too politically correct to name the country, the overwhelming interpretation of his speech was that he referred to Greece. In his speech, Soros stressed the euro was a flawed project from the start because the political integration lagged behind the economic, plus there were no options for any country to leave the Eurozone, which now seems inevitable. It is not only bad news for the euro, however, as China's Prime Minister Wen Jiabao reaffirmed his country's support for the troubled European currency. During his visit to Hungary, PM Wen stressed China has been investing heavily in the European bond markets and will continue to do so. It seems the Chinese are afraid the Greek crisis could spread to other countries on the Eurozone periphery. The domino effect could easily bring down Ireland, Portugal and even Spain and Italy. As a result, the Greek crisis could easily turn into another world crisis, with devastating effects on the economies of Europe and probably the United States, where economic recovery remains fragile. Another world crisis in the Western world is certainly very bad news for China's exporters. The Chinese economy is exports-driven so the Chinese have a massive interest in preventing yet another economic disaster in the Western world. It seems certain that the euro is heading for massive losses if the Greek parliament does not vote in the new round of reforms. Even if Prime Minister Papandreou manages to muster support for his proposals, the resolution of the crisis in Greece and the Eurozone is far from over. The Chinese support might be crucial in overcoming the crisis in the Eurozone, so the latest reaffirmation of China's interest in preserving the euro project will be welcomed as good news. Traders who believe that Prime Minister Papandreou will push the new package of reforms through the parliament, thus resolving the Greek crisis in the short run, while the Chinese support will be enough to resolve the Eurozone's problems in the long run will be interested in the ProShares Ultra Euro ETF ULE, the WisdomTree Dreyfus Euro Fund EU and the CurrencyShares Euro Trust ETF FXE. Other traders might think that even the Chinese support will not be enough to resolve the Eurozone's problems. As Soros pointed out, the origin of current problems is at the heart of the way the Europe is integrating, i.e. that economic integration is far outstripping political integration, and China's buying of the European bonds does not change this imbalance at the heart of the euro project. As a result, some traders might think that at least one country will be forced to leave the Eurozone, sending the European currency into a state of free-fall. Traders who find appeal in this scenario will be more interested in the Market Vectors Double Short Euro ETN DRR and the ProShares UltraShort Euro ETF EUO.