Two months ago, markets were anxiously awaiting the ruling of the German constitutional court in Karlsruhe regarding the ESM (which ended favorably). And now, constitutional issues may impede progress on Greece, which may run out of money in the next two weeks.
A Greek court said that the retirement age hikes and pension cuts may be unconstitutional. With opposition to these cuts at the opposition and also within the ruling coalition (Democratic Left), a constitutional change, if needed, seems like mission impossible. EUR/USD slides.
This news could send the troika and Greece back to the drawing board, as time runs out. The troika is split between the IMF which practically wants euro-zone governments to take losses (OSI), and between the EU, which refuses to give more money to Greece, only more time. Will Germany change its mind? It’s hard to believe that.
EUR/USD, which already saw the higher part of the range, is now sliding down to 1.2940, under the 1.2960 line. The pair remains within the wider 1.28-1.3170 range.
For more on the euro, see the EUR/USD forecast.