Talks of restructuring Greek debt, or default are intensifying, after being denied for quite a long time. This weighs heavily on EUR/USD that now falls to support. Update.
The German finance minister, which is known as having quite a big mouth, hinted about restructuring earlier in the week, and then denied it. But now, another German minister, already readies this development, by saying it won’t be a disaster and that Germany, the country that pays the highest bills, will pay for it.
This joins mixed messages from Greece, that wants more help, but denies a need to default. The option of implementing a Brady plan, that was dismissed earlier in the year, now seems like a missed opportunity to resolve this crisis in a better manner. Greek yields and CDS spreads are piercing through the sky, showing that the market sees Greece defaulting on its debt.
EUR/USD now trades at around 1.44, after bouncing off support at around 1.4380. It traded earlier at around 1.4460. For more levels, see the EUR/USD forecast.
It’s also important to mention that this fall of Euro/Dollar comes despite weak US figures. Other currencies are gaining against the greenback while the Euro is falling.
The American Consumer Price Index rose by 0.5% as expected, but Core CPI, which is closely watched by the Federal Reserve, rose by only 0.1%, showing that a rate hike is still quite far. Also the TIC Long-Term Purchases fell short of expectations – only 26.9 billion instead of 59.4 that was expected. The only US figure that slightly exceeded expectations was industrial output, that rose by 0.8%.
Another important US figure will be released soon – the initial release of consumer sentiment by the University of Michigan.
Update: Consumer Sentiment scored 69.6 points, slightly better than 68.7 that was expected. EUR/USD rises despite this figure, on fresh denials of a Greek default. As we’ve seen denials are the safe way to realizing it.
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