Euro creep higher as Greeks vacillate

mar bonnin palmer

Another deadline missed and still no agreement on the Greek debt situation. A meeting planned between interim PM Papademos and other political leaders failed to materialise and was rescheduled for later today. This is now becoming a parody of itself and were it not for the March 20th line in the sand (a EUR14.4bn bond redemption) this could be dragging on past Christmas.

Despite the delays, a comment by a Greek government official that the government was drafting an agreement on the bailout deal for approval later in the day moved EURUSD to an 8 week high and saw cable retrace back into the 1.59s. As we said yesterday, the pricing in/out of a default or deal is very liquid at the moment and the “path of most pain” is EURUSD higher from here to possibly 1.35. This has made sure that although there has been no bad news from the UK in the past 24hrs (BRC retail figures apart, which were largely brushed off) that GBPEUR finds itself below the 1.20 level.

As it stands at the moment in Greece it looks like members of the ECB/EU/IMF troika are looking to meet the individual party leaders separately before they come together later in the day. Whether they are using “enhanced negotiation” techniques cannot be confirmed and the similarities with prisoner’s dilemma is startling! Risk does point to markets moving higher today and a deal from Athens, or some positive move at least, could be the catalyst.

The Swiss National Bank reiterated its desire and stalwartness to keep the EURCHF floor imposed at 1.20 yesterday with interim Chairman Jordan stating that the bank will not tolerate a break of that level. EURCHF has rallied from the lows that it’s seen in the past few sessions as investors try to test the Bank however they are having none of it. There were rumours that the speech would coincide with a move of the floor to 1.22 but that turned out to be false. We do expect the floor to rise over the year, however, as the pressure on the Swiss economy grows.

The plan for today is very much the same plan as we have had for the past couple of days: watch out for Greece. The Dutch PM went a little off-piste yesterday by admitting that the Eurozone would survive without Greece and that the possibility had been discussed. Juan Manuel Barroso attempted to row these back by saying that all of Europe “wanted Greece in the euro”. One sounds true, the other false; I’ll let you guess which one.

The structured data for the week starts tomorrow with the Bank of England and European Central Bank meetings. For instant reaction to Thursday’s Bank of England and European Central Bank announcements you can join our webinar on Thursday at 2pm. It is free and we will be looking at what sterling’s prospects are for further gains in the coming months. You can register here

A German bond auction is the only real news in the debt markets today with a 5yr auction from Germany at 10.15 GMT.

Indicative Rates Sell Buy
GBPEUR 1.1981 1.2007
GBPUSD 1.5907 1.5931
EURUSD 1.3261 1.3296
GBPJPY 122.53 122.81
GBPAUD 1.4680 1.4707
GBPNZD 1.8971 1.9000
GBPCAD 1.5811 1.5840
NZDUSD 0.8374 0.8394
GBPZAR 11.97 12.02
USDZAR 7.5211 7.5527
GBPPLN 4.9814 5.0079
EURJPY 102.14 102.39

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