Once again all eyes are on Greece this morning as we are running the gamut of Greek theater. First we saw the drama unfold during the painstaking debt crisis resolution and now we’re watching the comedy of errors that is taking place with misstep after misstep. Will we eventually see the tragedy? And whom would it end up being tragic for: the Euro zone or Greece itself.

The G-20 meeting now taking place has essentially been hijacked by the recent events taking place in Greece and now a series of additional hurdles must be navigated in order for the Euro zone to survive in its current form. The first hurdle is tomorrow’s confidence vote which may end up seeing the current regime ousted, including the Prime minister Papandreou. This could prove disastrous as they scramble to form a new coalition and to determine who is actually in charge. Rumors and false headlines are now hitting the wires saying everything from Papandreou resigning to the referendum may be canceled.

This brings us to the second hurdle, should they survive the confidence vote tomorrow, which is the idea of the referendum on the bailout. While Greece may have been intending for this vote to decide on just the bailout, EU leaders have now made it perfectly clear that this referendum would be over whether or not Greece wants to remain in the Euro zone. All aid money that Greece was supposed to receive is now being withheld until this vote.

So there is a much greater possibility that Greece will not be a member of the euro zone by year- end. Who this hurts more remains to be seen. The problem of contagion though is starting to rear its head again as yields in Italy are increasing as they rush to cut deficits.

This all comes ahead of this morning’s ECB rate decision, the first under new chief Draghi from Italy. There is some speculation that he could issue some sort of statement to the effect that the ECB will be the lender of last resort for the EU or that he could even go so far as to reduce interest rates. As I mentioned yesterday, there is a distinct possibility he could do the latter.

**Edit for breaking news** Draghi cuts interest rates by 25bp!

However, yesterday’s FOMC statement was quite different with Bernanke lowering the Fed’s economic forecast yet again as they have been miserably behind the curve. Later in the day in his speech, he said that QE3 was a potential option which gave the market hope of the free-money trade being able to continue. Europe has continued to run with this theme as US dollar weakness is driving the forex markets this morning, despite all of the risk emanating for the Euro zone.

On the data front, there isn’t a whole heck of a lot going on, with the US initial jobless claims expected to show another 400K unemployed. Later this morning ISM Non-Manufacturing figures are due to be released. Tomorrow’s NFP report is the big one to watch.

Last night, New Zealand’s unemployment rate ticked higher to 6.6% from an expected 6.4% showing signs that economy is potentially cooling.

Other than these reports, the focus of the markets will be on what happens in Greece and how the Euro zone and the world reacts. Pressure on the Greek PM to withdraw the referendum has to be immense and whether or not he is even in power next week remains a mystery.

In the meantime, the anonymous rumors will dominate the internet so take them with a grain of salt. This could produce very choppy market action over the course of the next few days, which is a short-term trader’s dream, but a long-term investor’s nightmare.

So remember to take what the market gives you and to cut losses quickly and move on to the next opportunity. With uncertain markets conditions, one small error could turn into a huge mistake in not dealt with swiftly!

By Mike Conlon, ForexNews.com