Deadline for Greek, risk remains nervy

mar bonnin palmer

The markets will have to wait it seems for a resolution to the negotiations between the Greek authorities and private sector investors in Greek debt. Greek Finance Minister Venizelos originally set today as the deadline by which an agreement must be reached and although there will have been telephone discussions through the weekend between the major players, it is looking unlikely that this will be done with in the next 18hrs. The haircut is now likely to be around 70% of the value of the debt and should bring Greece’s debt to GDP ratio down to around 120% from a current level of 180%, although Greece is going to have to improve its growth picture to make this more likely.

I think the hope that is supporting markets at the moment is mainly as a result of these negotiations and a disappointment could see a big slash lower in risky assets at some point

This is probably the main reason for the euro weakness versus sterling in the past 24hrs of trading. GBPEUR has managed to recover from a 3 week low around the 1.1930 level obtained during Friday’s Asian session and now gives us a good idea of how much traders are wishing to push the pair to the downside. We have tested similar areas in the past few weeks and strong buying has been displayed. The near term top is the 15 month high of 1.2160 seen a couple of weeks ago and, event risk depending, we are expecting this range to hold through this week.

The biggest risk to the pound this week is Wednesday’s GDP announcement. As we stated last week some members of government have already started to soften the ground for a negative GDP number in Q4. George Osborne, who is currently on a tour of the Far East, said yesterday that a negative number was “possible”. We were one of the most bearish forecasters in November with our call for growth of 0.1%; it now seems we will be near the top end of things. The market is looking for a number of -0.1% with the high number 0.2% and the low -0.7%. The risk is obviously balanced towards the downside but any positive figure could see sterling fly. The figure’s announced Wednesday at 09.30.

There is little data today although we have already seen a poor business confidence number from France this morning which unexpectedly fell and continued a 6 month slide lower. We do have short term debt auctions from Paris and Berlin today which should be well bid as banks make use of the ECB’s loans.

Indicative Rates Sell Buy
GBPEUR 1.1997 1.2025
GBPUSD 1.5528 1.5553
EURUSD 1.2926 1.2948
GBPJPY 119.57 119.85
GBPAUD 1.4783 1.4804
GBPNZD 1.9196 1.9225
GBPCAD 1.5708 1.5737
NZDUSD 0.8078 0.8098
GBPZAR 12.31 12.36
USDZAR 7.9229 7.9599
GBPPLN 5.1529 5.1810
EURJPY 99.54 99.80

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Deadline for Greek, risk remains nervy

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