DailyFX.com -
Talking Points:
- Euro unimpressed as Greece, credits reach deal on debt relief
- British Pound, US Dollar correct lower after yesterday's gains
- Yen falls as Aussie, NZ Dollars rise amid risk appetite recovery
The Euro was little-changed as the Eurogroup announced a deal on Greek bailout funding. Athens and its creditors reached a deal that will unlock a €10.3 billion tranche of aid after the IMF relaxed objections having previously argued that a path to fiscal sustainability had not been secured.
A round of debt relief measures meant to reduce Greece's overall debt load was at the heart of the compromise. The IMF wanted creditors to implement debt relief upfront but settled for approving it after the current rescue effort runs its course.
Greece contagion risk has been contained for some years now because the majority of the country's debt has been transferred from private hands to various public and supranational bodies. This means today's accord is of little near-term significance for financial markets. It may set a powerful precedent however.
The promise of debt restructuring seems like a key victory for the previously obstinate administration of Prime Minister Alexis Tsipras after it softened its stance on EU demands in recent months. This may emerge as pivotal for Spain, where next month's elections threaten to elevate Podemos - a party of anti-austerity firebrands akin to Tsipras' Syriza - to a position of power.
The message from Brussels and Washington, DC to Spanish voters appears to read thus: work with us and you will be rewarded, opt for intransigence and we will have little for you. Indeed, Greece was nearly ejected from the single currency amid a spat with creditors last year. If this sways Spain's election away from eurosceptic victory, it may yet offer a boost to the single currency.
The British Pound retraced broadly lower overnight having outperformed on the back of BOE rhetoric yesterday. The currency pushed higher as expected as Governor Carney and company defended their mostly negative assessment of near-term "Brexit" impact if voters opt to take the UK out of the EU at a referendum late next month.
The US Dollar was also in corrective mode, edging downward having advanced on the back of swelling Fed rate hike bets in the prior session. The year-end Fed Funds rate outlook implied in futures prices moved to its most hawkish setting in two months.
The sentiment-linked Australian, Canadian and New Zealand Dollars traded higher alongside stock prices while the anti-risk Japanese Yen declined as risk appetite firmed in Asian trade. The MSCI Asia Pacific regional benchmark equity index added 1.6 percent in a move that seemed to reflect follow-on momentum from a chipper mood in Europe and the US yesterday.
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Asia Session
European Session
Critical Levels
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
