Depositors in Greece have withdrawn €3bn from bank accounts this week in fear that the government could impose capital controls or forcibly convert their money into drachmae. There are lengthy queues outside biscuit tin and mattress shops. But fear not, EU leaders will sort it all out on Monday.
To no one's surprise, the euro zone's finance ministers failed to come up with a solution to the problem of Greece at yesterday's Eurogroup meeting in Luxembourg. Jeroen Dijsselbloem, the president of the group, said "no agreement is yet in sight". A previously-scheduled gathering of all 28 of the EU's finance ministers today has been relabelled an "emergency" meeting and there will be an "emergency" summit meeting on Monday.
Outside the EU corridors of power and the Greek retail banking system nobody seems unduly concerned about the situation. European share prices were mostly higher yesterday and the euro was by no means the weakest performer among the major currencies. It kept pace with the US dollar and strengthened against the Swiss franc.
Bears savage the krone
The main victim on Thursday was the Norwegian krone. After the Norges Bank cut its benchmark interest rate from 1.25% to 1%, a record low, the krone fell sharply. It was the Australian dollar that led the field, with the NZ dollar in second place.
The Norwegian rate cut was not a surprise: 16 of the 17 economists polled by the Bloomberg news agency had predicted the move. That being the case, the reaction of the krone was very much a surprise: the currency lost 2% of its value. It was almost as though the speculators dived in to sell it because they had nothing better to do. Sterling strengthened against all but the antipodean dollars, adding half a US cent and half a euro cent.
The UK retail sales provided no trading opportunity: an unexpected 0.2% increase in May was offset by a downward revision to the data for April. The headline US inflation rate of 0.00% was below the 0.2% expected by the market but investors had to assume the Federal Reserve had prior knowledge of the figure when it made its policy decision the previous day. And, apart from slightly fewer-than-expected US jobless claims, that was it for the day.
ECB ELA Q&A
The only data of any consequence today are for UK public sector borrowing and Canadian inflation. They pale into insignificance alongside the "emergency" meeting of the European Central Bank's Governing Council, which will be conducted by telephone.
The subject of the emergency is the haemorrhage of Greek bank's deposits. Their only source of cash to plug the gap is the ECB's Emergency Liquidity Assistance. It is hard to see the ECB refusing assistance at this stage: to do so would be to pre-empt Monday's summit meeting.
However, if the ECB were to refuse to extend its aid, the banks in Greece might not be able to open on Monday. Have an optimistic weekend.