Euro dollar is steady in the middle of the range, as talks between Greek leaders are close to conclusion regarding the terms of the bailout. Greek politicians have little choice, but they want to improve their position before the elections. In the meantime, Germany and France want to segregate the bailout money in a separate account, while Greece checks out its default options. Ben Bernanke returns to the scene later on.
Here’s an update on technicals, fundamentals and what’s going on in the markets.
- Asian session:A quiet session saw the pair consolidating above 1.31.
- Current range: 1.3060 to 1.3145
- Further levels in both directions: Below: 1.30, 1.2945, 1.2873, 1.2760, 1.2660 and 1.2623
- Above: 1.3145, 1.3212, 1.3280, 1.3333 and 1.3450.
- Serious support is only at 1.2945. The round number of 1.30 isn’t strong.
- 1.3212 proved to be a strong cap.
Euro/Dollar in range- click on the graph to enlarge.
- 7:45 French Trade Balance. Exp. -5 billion. Actual -5.2 billion.
- 11:00 German Industrial Production. Exp. -0.1%. Actual -2.9%.
- 15:00 US Federal Reserve Chairman Ben Bernanke talks.
- 15:00 US IBD/TIPP Economic Optimism. Exp. 48.1 points.
- 20:00 US Consumer Credit. Exp. 7.7 billion.
For more events later in the week, see the Euro to dollar forecast
- Standoff in Athens continues: The EU / ECB / IMF troika demands a cut tot he minimum wage and many more demands from Greece, in a non-negotiable manner. A deadline for Sunday evening has been extended to Monday and the evaporated. Greek PM Papademos made progress with political leaders to accept the deal and this will likely be seen soon. Elections are awaiting Greece in April (for now). A general strike is held today. The troika prevents Greece from signing off the PSI talks before these reforms are agreed upon – a condition for the second bailout. It’s either an orderly default with harsh austerity or a disorderly default and potential departure form the euro. The euro-zone lost patience with Greece, and Greeks lost patience after years of recession. How will this end? Greece has more than 14 billion euros of bond payments due on March 20th. Together with the grace period, March 27th is the final deadline. For a potential default of Greece (Grefault), the Greek PM asked for a report.
- Escrow account: Merkel and Sarkozy have little faith in Greece. After making a strong statement, they also discussed placing the money in a special escrow account that will be used to pay bondholders.
- Excellent US job data lowers chance of QE: The drop of the unemployment rate to 8.3% and the gain of 243K jobs in January provide a lot of hope for the US and might chance the course of the Federal Reserve, which hinted on another round of dollar printing. We will now hear from Bernanke.
- Hope from Australia: The RBA surprised and didn’t cut interest rates. The bullishness down under joins the US strength and indirectly helps the euro.
- Portugal awaits Greece: Portuguese yields remain on high ground. The path chosen for Greece will likely be followed by the small Iberian country in the infamous “contagion” effect that is feared.
- ECB Pressured to take a haircut: This seems to be the sticking point, after the Private Sector Involvement has been mostly agreed upon. More and more speakers call for the ECB to take a hit on Greek bonds, despite the “no bailout” clause in the EU Treaty. The pressure comes from the banks (naturally) and also from the IMF. Note that ECB president Draghi didn’t categorically reject this. If Greece defaults, the ECB will have a 100% involuntary haircut.