Markets are trading on relief. The EUR climbed in the Asian session after the EU leader’s agreement to support the regions financial system. They’ve agreed a deal to bolster the EFSF (European Financial Stability Fund) to 1 Trillion EUR from its current level of 440 Billion EUR. Instead of the 60% ‘haircut’ for Greek debt holders they’ve agreed upon 50% and in addition they’ve agreed to inject further funds of 125 billion to recapitalise the banks to safeguard against Greek debt writedowns. The EUR surged across the board on the release of the news however once the detail is looked at more closely (key details are lacking at present and will be unveiled in the coming weeks) I think you’ll see a sell off in the EUR.
The market hasn’t liked the slow progress of discussions so pretty much any progress is positive for the EUR. It’ll be interesting to see over the coming days how quickly and effectively the above measures are implemented and the markets reaction to the small print. Is the debt crisis over? Far from it however the measures announced is a big step in tackling the debt crisis
EUR/USD has posted fresh 6 week highs breaking the psychological barrier of 1.40. GBP has lost some ground on the back of this move and is now trading lower against the EUR. GBP/USD is trading around similar levels to yesterday.
We have some data out of the Eurozone today in terms of consumer and business confidence with some important figures out of the US this afternoon in the form of GDP data. The markets will be digesting the news from the summit today and a further rally in the EUR is likely however once we drill down into the detail we’ll see a weakening in the EUR to more realistic levels.
If you’re a seller of EUR against the USD now would be a good time to put an order in the market as we’re at new highs on this pair.
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