Despite Increasingly Likely Greek Default, Euro Rallies

At this point, it seems almost inevitable that Greece will default. Market commentators have begun to shrug off the possibility, with JP Morgan Chase's

CEO Jamie Dimon going so far as to say that the net effects from a Greek default on US financials would be almost nothing. As of this moment, the situation in

, although negotiations remain ongoing. While last year market participants seemed deathly afraid of a possible European financial contagion, Friday's actions may indicate that the fear is no longer within investors' minds. US equity markets pulled back slightly, but the dollar gave a tremendous amount of ground to the euro. The EUR/USD moved up nearly 1% during Friday's trading session, breaking above $1.32. The move may have been the product of a short squeeze, as the euro has been heavily shorted in recent months, with some predicting that the two currencies would soon reach parity. For its part, the US dollar index also moved lower on Friday, dropping over 0.6% and moving closer to $78. Still, the euro's rise seemed to be motivated by other factors beyond US dollar weakness. As evidence of this, the euro rallied against other currencies on Friday such as EUR/GBP (which gained over 0.5%) and the EUR/CAD (which gained over 0.7%). Market chatter circulated on Friday that Greece and its creditors were close to reaching a deal. That may be a best-case scenario for the euro, as an orderly default would probably prove best for the safety of the Eurozone. In the event of a "voluntary" default, the credit default swap arrangements may not even be triggered, significantly reducing the uncertainty in financials. Still, Friday's positive move was rapid to the upside on Friday. In the event that the Greek scenario plays out less than favorably, the move could quickly reverse. Of course, the trade may continue, and could even become more significant as shorts are squeezed upward still.