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Euro Rises Above 1.2800 on Hopes of Greek Deal

Last updated 1/18/2012 2:47 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

The EUR/USD was mildly bid at the start of European trade today as markets focused on the negotiations regarding Greek debt with discussion between the government and private bedt holders set to resume today.   The Institute of International Finance, which represents banks involved in the proposed Greek debt swap, said Tuesday that negotiations should resume on Wednesday with “a sense of urgency.”

Private investors are reluctant to assume a 50% haircut on their holdings with some parties insisting on higher coupon payments from the Greek government.  However, according to reports by the New York Times Greek Prime Minister Lucas Papandemos  has threatened that if Greece did not receive 100% participation in the program in which boldholders will voluntarily write down $130 billon from Greece’s debt, the country would consider passing a law to require them to take losses.

A restructuring of Greek debt  would provide some temporary relief for the EZ sovereign debt markets, although few analysts believe that the country will be able to avoid default in the long run given its massive debt of 130% of GDP. Nevertheless an agreement with private sector creditors would provide a boost to investor sentiment and push EUR/USD higher. The  pair continues to recover from Friday’s sharp selloff in the wake of downgrade of France with as it approached the 1.2800 figure ahead of the EU equity open. If risk flows remain positive as teh day proceeds, further short covering could it push it to 1.2850.      

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.