However, the size of the haircut on bigger deposits is still unknown. EUR/USD had an initial jump, but didn’t go very far and it is falling now.
So what’s in the deal?
The Popular Bank of Cyprus (Laiki) will become less popular and will shut down. The small deposits of up to 100K euros will be transferred to the Bank of Cyprus and will remain insured.
Deposits above 100K euros will be frozen and will be used resolve outstanding debt. Hopefully, big deposits in Laiki will have the sufficient funds to cover the debt. If not, big deposits from the Bank of Cyprus will be tapped into.
Update: The chair of the Cypriot finance committee estimates that losses will reach 30%.
Another update: The size of the levy will be determined by Tuesday.
The deal does not need to approved by the Cypriot parliament, according to the German finance minister, as laws have already been put in place.
Euro/dollar began the trading week with a gap lower. When trading began, there was a high uncertainty about the deal. When the news about the deal came in, the pair jumped higher and reached 1.3050. However, as European traders entered the scene and the uncertainties were digested, the pair dropped back under 1.30.
Minor support is at 1.2960, with further support at 1.2880. Significant resistance is at 1.31. For more levels, events and analysis, see the EURUSD forecast.Get the 5 most predictable currency pairs