The euro started yesterday with a firmer tone on the news that China would continue investing in euro debt and pledges from the Greek opposition Conservative Party to commit to tough austerity measures. This was before the latest twist in the on-going Greek debt saga saw renewed pressure on the single currency, which has fallen back to trade at three week lows to the dollar, at around the $1.30 level. This follows reports that the EU was considering delaying all or part of the latest Greek bailout package, though hoping …

The Bank of Japan surprised markets overnight, as it decided to expand its asset buying programme by Y10 trillion to Y65 trillion (the entire amount will be used for the purchase of long term government bonds) and set a price stability goal of 1%. In doing so it is abandoning its long used “understanding of price stability” phrase. The consensus view had been that the BoJ would leave policy on hold, with the yen sold across the board after the announcement. The dollar hit three week highs, though the yen …

Market sentiment took a hit overnight as traders showed fresh nervousness about Greece’s chances of avoiding a default. A deal appeared to be sorted out yesterday afternoon but after their meeting late in the day, EU Finance Ministers withheld a new bailout and ordered Greece’s government to agree to further cuts to the amount of €325 million. They also demanded that Greece get Parliamentary seal of approval (rather than verbal agreement) that they are ready to deliver on past and new pledges before granting a second bailout package, which, if …

The euro is trading at yearly highs versus the dollar, bolstered by optimism that we are close to a debt restructuring deal in Greece, as well as hopes that the government there will manage to reach agreement on the new round of austerity measures needed to secure fresh funding. Markets are particularly encouraged by indications overnight that the European Central Bank is willing to participate more than previously thought in the restructuring. Little detail is known about how this will work, apart from the fact that it will help to …

The euro succumbed to month end selling pressures late yesterday and overnight, falling back versus other majors as a result. It fell to lows of $1.3026 versus the dollar as markets also fretted about the lack of a debt deal in Greece as improved sentiment on the back of better than expected data from China had little impact.
There is talk that we could see some resolution to the talks today but there is also speculation that a final deal will not be done until Greece can show further commitment …

Starting the week on a relatively firm footing versus the dollar, the euro faces some key challenges this week including today’s EU Summit (the 17th in two years), as well as ongoing debt restructuring discussions between Greece and its private sector investors. EU leaders will meet later to finalise the details of a fiscal pact aimed at reining in budget deficits, as well as giving the final sign off to a permanent bailout fund (ESM) with a lending capacity of EUR500 billion ($661 billion). One of the main stumbling blocks …