EUR

Source: Commerzbank

EUR: Once again the euro benefits from the fact that an agreement about the haircut in Greece is “imminent”. Greek government circles have suggested that Prime Minister Lucas Papademos will announce the result shortly. The official announcement of a debt restructuring agreement with private creditors might initially provide further support for EUR-USD after the cross already left its recent trading range between 1.3030 and 1.3230 yesterday afternoon.

Also the negotiations about a new austerity package (precondition for the new EUR 130bn. aid programme) seem to be making progress. According to media reports the 15 page document contains cuts in the private sector but also spending cuts in the medical and military sector. Moreover the subsidies for towns and communities are to be reduced. Some European politi-cians seemed optimistic that negotiations about the new aid packet for Athens could start as early as this week. Should these signals turn out to be correct and the Greek coalition parties create no further difficulties risk appetite might rise further.

However, we doubt whether the optimism on the markets really is justified and therefore sus-tainable. It will have to be seen whether the debt restructuring solution that has been agreed will find sufficient support amongst the private investors. Only then would it be possible to re-duce Greek debt levels as planned. And the Greek austerity programme still has to pass the real obstacle, the vote in parliament. The market seems to ignore these facts at present. Fol-lowing the breach above 1.3230 (EUR-USD peaked at 1.3270 yesterday) the resistance at 1.3280 would have to be taken out for any further rises to be possible. That would create scope towards 1.3436, the high of 2nd December. In our view such a rise would provide selling oppor-tunities in EUR-USD.

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