Mike Paterson’s daily Forex brief
Well finally, after a 13 hour meeting (at least they didn’t rush this one like the last one), Jean Claude Juncker Chairman of the Eurogroup of finance ministers announced late last night that an agreement had been reached in principle to bail out Greece to the amount of â‚¬130 billion, which comes after the failure of the first bailout of â‚¬110 billion in 2010.
I say agreed in principle to exert a note of caution as the terms of the deal still need to be ratified by the Greek parliament tomorrow as well as Germany and Holland next week, both of whom have been extremely critical of lending more money. In addition there is the not inconsiderable matter of asking the private sector investors in Greek bonds to take losses of 53.5%, and still ask them to come back and buy some more! And the IMF, bless ‘em, will decide next month what they can throw in the pot.
Within the next two months, Greece will also have to pass legislation giving priority to debt repayments over the funding of government services and set up a special account, managed separately from its main budget, which will at all times have to contain enough money to service its debts for the coming three months.
Depending on your stance this is either throwing good money after bad, buying a little more time before having to face the unknown abyss beyond, or it’s the start of a united effort by the Eurozone to pull away from the brink.
This uncertainty is reflected in the markets which have responded positively as to be expected, but similarly we’ve seen little real momentum in either the Euro or equities. EURUSD has yet to breach a big barrier at 1.3300 and EURGBP has so far capped at 0.8385 (GBPEUR down to 1.1925) ahead of large resistance at 0.8410 (1.1890 support). EURJPY continues its strong rally though as I’ve been highlighting
If you’re a Euro bear you will be pleased by the lack of any real advance higher at this point but Euro bulls will point to strong demand in the dips still. The market is heavily short of Euros still for the longer term and this may well lead to another squeeze higher but it could be a fragile rally.
So it looks like we’re going nowhere still, for the moment at least, while the uncertainty continues.
Enjoy your pancakes!
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