Gamblers increasingly see Greece staying in the euro region amid optimism a deal can be sealed to keep aid flowing to Athens.

Betfair Group Plc put the odds of Greece not leaving the currency bloc this year at 1/14, meaning a successful 14-pound bet ($22) wins one pound, compared with 1/5 on Monday. Those odds imply a 93 percent chance Greece will keep the euro, Betfair said.

“Punters have clearly made up their mind that Greece will stay in the euro zone, for the remainder of this year at least,” said Naomi Totten, a spokeswoman for the London-based betting company.

 

Betting markets can provide clues to the direction of events. So certain was Betfair of the outcome of the Scottish referendum last year, it paid out on voters rejecting independence two days before the ballot, even after polls suggesting a tight contest had sent the pound tumbling.

David Fuller's view

Markets began to discount an agreement enabling Greece to stay within the Eurozone on Monday.  This will please equity bulls and anyone who wishes the Euro region well, including the USA’s government.  The US Federal Reserve will feel that a major international uncertainty, which would have most likely caused it to delay further that first interest rate increase, has been removed.  However, it will view today’s rise in the Dollar Index with dismay.  The Fed could intervene once again, although at best this is a policy only used when the currency has changed sufficiently rapidly to impede the economy, as we saw with 1Q’s GDP figures, including a slowdown in corporate profit growth.  Moreover, Janet Yellen will know that there are good reasons to expect the US Dollar to strengthen further over the long term, not least because of America’s technology lead.  The Fed wants to raise rates gradually but it does not want this to boost the Dollar.  Therefore it could hope that this may be a case of ‘buy the rumour, sell the news.’  However, if the Dollar continues to rally towards it March-April highs, it could try to jawbone it lower and/or sell it aggressively should it approach 100 once again.

Meanwhile, a stronger US Dollar would be a headwind for the profits of US multinationals, and consequently also GDP growth.  It would also put more pressure on developing economies which have borrowed in US Dollars against the background of zero interest rates.