Irish IMF/EU Agreement Reached – Euro to Have a Good

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An 85 billion euro aid package deal has been reached between the EU / IMF delegation and the Irish government. All the Euro-zone’s finance ministers are now in Brussels, waiting to see the terms and to approve them, especially the interest rate at which Ireland will borrow. This should give a temporary boost to EUR/USD.

European officials are in a race to announce the deal before the markets open on Monday. Yesterday, a big protest in Dublin called the government to abandon the severe budget cuts and let the banks fail alone, without the Irish people having to pay the price.

The Irish Times reports:

“EU finance ministers are now ready to sign off on it, but I think they will also want to discuss some of the finer details and add some political impetus to what has been agreed in Ireland,” he said.

It will be interesting to see if holders of bank bonds will get a “haircut”.

There’s no certainty that the Irish government will manage to pass the budget on December 7th as planned – the coalition’s majority is narrower now, as they lost one supporting member in a by election. And there are also “rebels” within PM Cowen’s ruling party as well.

We’ll get to feel the see the market reaction to the deal through EUR/USD – it’s likely to rise on the good news, but as Gerry Davies writes, this was quite expected.

EUR/USD closed the previous week on its knees after losing around 450 pips. For technical analysis and an outlook of events, see the Euro Dollar forecast.

Update 16:00 GMT: A fresh EUR/USD Elliot Wave analysis sees deep low targets for the pair.

Last week, the announcement of an Irish aid request got the Euro a good start of the week, but the cracks in the Irish government and the fear of contagion led to a collapse of the Euro throughout most of the week.

A good gauge of contagion fear can be found in the Spanish 10 year bond yields, that reached record highs.

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About Author

Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

7 Comments

  1. Hi Yohay

    Nice report.

    Agreement is done..

    Let’s look of strong euro tomorrow.

    Keep going. I’m a huge fan of your forex reports!

    Best Regards

    mike

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  3. Hi
    Now since the bailout agreement for irish is done but on the other hand in spain catalonia, the ruling socialist party was heavily defeated after 2003 with a big margin, where you are now looking EUR?
    If we look into agreement, the EUR should jump but the catalonia election results may send the EUR down.

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  5. Thanks Mike and Muhammad. I certainly agree that Catalan elections pose risk to the Euro. I’ve covered both issues in a fresh post.

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