Posts tagged ‘Greek’

February 20, 2012

FXMR:EUR/USD has higher R/R to the downside

FX Market Report believe today’s Eurogroup decision for a €130bn Greek bailout won’t be a full agreement, but a partial deal with “difficult and contentious issues unresolved until a later date”.

“Here at FXMR we remain convinced that Greece is irreparably broke and has no sustainable debt dynamic other that a default and a new beginning”, writes Gavin Grier-Rees, stating that Germany, Netherlands and Finland already voice the same opinion. “That’s why we predict ever harsher conditions will be imposed on the Greeks until they eventually are forced from the single currency. What we are seeing here is both sides trying to avoid being given the blame for ending the dream of a single currency”, he adds.

FXMR analysts believe the strong week start, high at 1.3240, was a relief move as Greece didn’t default this weekend.

“Risk‐reward must be to the downside”, with supports at 1.3110-15 and 1.3145-50. As news disappoints, last week’s lows at 1.2975 is next target.

February 17, 2012

GBP/USD selling pressure awaits at 1.5940/50

By charmner charts

The sterling has followed suit in yesterday’s session and jumped from the zone at 1.5670 to the proximities of 1.5820 on the upbeat news from Greece and the possibility of a swap in the ECB holdings of Greek bonds. Market sentiment shifted to risk-on trade after the first half of the session in Europe, where risk aversion has prevailed, propelling the high-yielders to session highs towards the sunset of the American trading hours.

In the view of C.Harmer, analyst at Charmer Charts, the 1.5820 level should hold well the bulls’ attempts, expecting some selling pressure to drag the cross back to 1.5725/1.5700

“Now, if we do break 1.5840 on the topside we should be able to carry on higher with 1.5880 to 1.5910….If above 1.5910 we see 1.5940/50 but this should be the top and we would expect some strong selling pressure here”, she concluded.

February 11, 2012

Papademos gets Greek Cabinet approval on bailout plan


Lucas Papademos, Greece Prime Minister, has gotten the Cabinet okay on the second rescue package and to submit the new regulation for new budget measures on the back of the Troika demands according to Bloomberg report on Greek Official.

After a week that has been dominated by news from Greece, where the politicians held interminable talks on a new package of austerity measures required by the Troika in exchange for releasing the second bailout. Even though the party leaders finally managed to reach consensus, just before a special Eurogroup meeting called on Thursday to deal with the situation, EU officials approached the approved plan with reserve.

Disbelief over the effectiveness of the new Greek austerity plan kept the Eurogroup reluctant to sign off on a fresh second bailout worth 130 billion euros. Despite the most painful austerity measures Greeks will witness on their life-time, Eurozone ministers have cast doubt over the plans. They demanded additional savings of 325 million euros, a ratification of the austerity plan by the Greek parliament and a written commitment that they will be implemented no matter what the result of the April elections is.

German FinMin Schaeuble stated plainly “Greece must first implement parts of the first program before we decide upon a second bailout. We still don’t have the conditions required by the EU council. I’m confident the timetable can be met. It’s all down to Greece, (but) these are not simple decisions. I don’t think we’ll come to any results tonight. The negotiations have made progress but we’re not there yet.”

The Greek government will hold a meeting at 16:00 GMT to discuss Troika’s requirements. The parliamentary vote is supposed to take place on Sunday or on Monday.

Meanwhile, Greek labor unions have scheduled for Friday another, second this week 48 hour strike to protest against the painful austerity measures. Thousands of Greek citizens took to the streets to participate in demonstrations, which in some cases turned into riots. The country’s largest police union, reluctant to “fight against brothers,” made a symbolic announcement that they will issue warrants for EU and IMF officials, accusing them of “…blackmail, covertly abolishing or eroding democracy and national sovereignty,” according to Reuter’s sources.

As far as the PSI negotiations are concerned, they have to be concluded by February 13 if the March 20 bond payment is to be made, but that is contingent on the Troika signing off the aid package.

EU exasperated by lengthy Greek austerity negotiations 

During the course of the week Eurozone leaders were constantly expressing their exasperation with Athens’ inability to strike a deal quickly even though, as Angela Merkel said, “Time is of the essence. A lot is at stake for the entire euro zone.”

On Wednesday night, after three days of delays, Greek coalition leaders prepared a a draft deal on austerity measures demanded by the Troika. Greece’s government pledged to cut by 20% the minimum wage, reduce 15,000 state jobs in 2012 and 150,000 until 2012 and decrease medicine spending from 1.9% to 1.5%. The only point still causing controversy, namely pension cuts, was sorted out the next day, closing thus the negotiations.

Meanwhile, the ECB seemed to have been gradually relaxing its stance on what contribution it could make in the Greece restructuring sovereign debt program. According to Wall Street Journal sources: “The ECB is now willing to exchange Greek bonds with the EFSF, but will not take any losses on the exchange.” Still, no decisions are to be made before Greece finalizes the PSI deal and Mario Draghi refused to comment on the matter during the press conference following ECB’s interest rate decision on Thursday.

Kathy Lien, Director of Currency Research for GFT comments: “If everything goes smoothly, Greece will receive bailout funds just in time to avoid default. Before getting too excited however, its important to remember that there are still a few hurdles to clear before the funds can be released. The Greek and German Parliaments have to vote on the full package – but we expect the votes go smoothly because it would be a major embarrassment and setback for everyone if the plan was rejected.”

February 10, 2012

“No Disbursement Without Implementation”

by Danske Bank

Euro area finance ministers set three conditions

At the Eurogroup meeting last night the euro area finance ministers set three conditions that need to be fulfilled before the ministers will approve the second rescue package to Greece:

  1. Parliament approval of policy package (vote set for Sunday)
  2. Additional EUR325m in structural reduction of deficit to be detailed before next Wednesday
  3. That the political leaders of the coalition parties sign up to the implementation of the programme.

The Luxembourg Prime Minister Jean-Claude Juncker stated that all three elements need to be in place before the second rescue package and the PSI operation can be implemented. Juncker expressed his view very clearly: “In short: no disbursement without implementation”. He added: “We can’t live with this system while promises are repeated and repeated and implementation measures are sometimes weak”.

The Euro working group is set to meet on Tuesday and a new extraordinary assembly for Eurogroup finance ministers has been set for Wednesday, but these meetings are conditional on Greece fulfilling the three conditions.

At the meeting Juncker confirmed that the new rescue package and PSI aim to reduce the debt level to 120% of GDP by 2020. The new package will be constituted by up to EUR100bn in additional financing and up to EUR30bn in official sector contribution to bank restructuring in the wake of the PSI.

All eyes on Greece this weekend

According to Greek Finance Minister Evangelos Venizelos the parliamentary vote on the new austerity measures will be on Sunday and that this basically amounts to a Greek ballot on euro membership. A vote that furthermore will take place in the midst of a new two-day general strike starting today. We expect that the austerity package will pass.

Risk of hick-up is real

The risk of hiccups in the process to avoid a Greek default has increased. Clearly several euro area member states are now ready to choose the other road – Greek default and possibly euro exit – instead of giving more funds, if Greece is not committed to deliver the necessary austerity and structural reforms. In addition, the risk of social unrest in Greece is on the rise after a week with general strikes Tuesday and again today and tomorrow. Nevertheless our main scenario is that Greece will deliver on the three demands from the Eurogroup and get the bailout package in time to avoid an uncontrolled default.

February 8, 2012

Optimism Mixed With Cautious Trading As The Greek Situation Remains Uncertain


Optimism mixed with uncertainty in the market, where we can see the euro is fluctuating within narrow levels; however, European stocks were able to record gains and now European markets depends on any improvement in the Greek-debt talks with creditors and also as the Greek Premier meets the leaders of the Greek political parties, discussing the terms required by international lenders to obtain the second bailout funds.

Time is running out and now markets are very focused on the Greek financial situation, where despite the fact that debt-talks extended for a long period of time, the situation is getting more complicated as the wheel of time keeps on turning and now Greek officials must reach an internal agreement among the ruling parties and must also reach an external agreement with international lenders and the private sector.

The Greek Prime Minister is to meet with the leaders of the Greek political parties today, negotiating the terms and conditions of the second bailout package required by the International Monetary Fund, the European Union and the European Central Bank in order for Greece to be eligible to get the financial aid needed so Greece can avert a financial disaster in March.

Political leaders must approve an additional 1.5% cut of the total gross domestic product suggested by the Greek Prime Minister, Lucas Papademos, who attempts to meet the budget targets and reduce the highest debt-to-GDP ratio in the euro zone to 120% by 2020.

Moreover, the sentiment is still highly uncertain as markets are still waiting for the results of the Greek debt-talks with the private sector over the percentage haircuts and the coupon rate to be paid on the new 30-year bonds to be issued in exchange for the existing Greek debt holding, where according to a person familiar to the matter, the private sector is prepared to accept 3.6% coupon rate on the new bonds, while other reports mentioned that the European national central banks will be involved along with the European Central Bank and the cuts on Greek debt could reach 70% so far.

On the other hand, Greece is still negotiating the terms of the second bailout deal with the international lenders, where the second bailout package which was approved in July and worth 130 billion euros is still suspended as lenders demand the Greek government to sign up to measures ranging from a cut in the minimum wage, lower pensions and immediate layoffs for 15,000 state employees.

Moreover, Germany and Switzerland released some important fundamentals today, adding more pressures on the sentiment to remain mixed, where the Swiss unemployment climbed, yet less than expected which added some positivity to the market; however, Germany released the trade balance figures, which showed that the trade surplus narrowed sharply due to the sharp drop in exports.

Furthermore, German sold 3.29 billion euros of 5-year bonds on an average yield of 0.91%, up slightly from 0.90%, while bid-to-cover ratio dropped to 1.8 according to the Bundesbank; however, the sentiment remained unchanged as the bond sale wasn’t disappointing and came in line with expectations.

As of 06:51 EST, the German DAX index was 0.61% or 41.22 points higher, trading currently around 6795.25 points, led by the financial sector, which added 1.52%. However, the utilities sector shed the most today as the sector lost 0.21%.

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February 8, 2012

Citi: focus to stay firmly on Athens today

From Dow Jones:

“Focus to stay firmly on Athens today says Citi because there is very little in terms of fundamental data releases to drag traders’ attention away from developments in Greece. Overnight, renewed optimism of a progress in Greece has helped boost EUR and Citi suspects that “a move closer to a deal on the second Greek bailout could help EUR and risk-correlated currencies regain some more ground with JPY and USD among the key underperformers.” However, with the clock ticking in Athens, any further delays could put the bounce in these currencies to the test, says the bank. That should see the likes of EUR, SEK and NOK continue underperform against the likes of AUD and NZD, which are less exposed to the developments in the euro zone. EUR/USD now at 1.3279.”

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February 8, 2012

Papademos To Hold Talks With Political Leaders Amid Concerns

Greek Prime Minister Lucas Papademos will hold a meeting with three of political party leaders today after postponing it yesterday for the second time as the government and international creditors disputed over the clauses demanded to secure a second bailout worth 130 billion euros announced in October.

Papademos, instead, conducted unscheduled talks yesterday with the so-called troika on details of the spending cuts needed to become eligible for receiving the aid package.

The Greek Prime Minister managed to reach a tentative agreement with three of political party leaders after talks over the weekend, where they agreed to make further budget-cutting measures equal to 1.5% of GDP, yet they will continue talks today to flesh out details as well as other to discuss measures demanded by international lenders to grant Greece a second aid fund; specifically, bank recapitalization framework, wage cuts and measures to enhance competitiveness.

Still, there are concerns that Greek political leaders may not reach consensus regarding the further spending cuts needed to receive a second bailout, thus tumbling into default as early as March as the government has to repay 14.5 billion euros of debt maturing.

Antonis Samaras, the head of the second biggest political party, said ‘they are asking us for greater recession, which the country can’t take,’ and ‘I will fight to avoid that.’

On the other hand, the Greek government is under pressure from German Chancellor Angela Merkel who said ‘I can’t quite understand why we need a few more days.’

Regarding talks with private-sector bondholders, Papademos held talks yesterday with Charles Dallara, managing director of the International Institute of Finance, where negations will probably come up with a deal which includes the acceptance of 3.6% borrowing cost on 30-year bills and losses equal to 70% by the creditors, yet euro area finance ministers said no deal could be accomplished before adopting reforms needed for the second bailout.

Moreover, the European continent lacks fundamentals, except for German trade balance data which showed that the surplus narrowed to 12.9 billion euros in Dec from the revised surplus of 15.9 billion euros. Exports dropped 4.3% compared with the revised 2.6%, while imports slipped 3.9% from the revised -0.2%.

The European common currency is currently trading near the day’s opening level versus the U.S. dollar around 1.3263 after gaining in the previous two sessions.

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February 7, 2012

Aussie surprise in a Greek day

While the FX market attention is clearly dominated by the Greek run against default, today the Asian session had a little surprise as the RBA decided to keep its interest rate at 4.25%, against the 25bp cut consensus. “The accompanying statement pointed to improved financial market sentiment, although it also said there was scope for further easing “should demand conditions weaken materially””, writes Vassili Serebriakov, analyst at Wells Fargo Bank.

The CHF and the JPY are being kept from higher gains by the respective SNB and BoJ. Today, the SNB Chief stated his commitment in defending the 1.20 floor in the EUR/CHF, and Japan’s finance ministry announced its 1.02 trillion yen selling in November.

About the Eurozone crisis: “A successful resolution to the Greek uncertainty could boost the euro to a test of recent technical resistance”, says Serebriakov. “However we still believe the currency’s rally from January lows remains corrective and is unlikely to be extended significantly above current levels”.

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