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Euro Surges on Greek Hope, Rumors

 

Greece offered a new plan to its creditors for ending the stalemate over new financial aid for the beleaguered Mediterranean country at the same time as its creditors discussed their terms for a deal and Euro group President Jeroen Dijsselbloem was quoted as saying an agreement is "Not theoretically possible", this week. 

Greek Prime Minister Alexis Tsipras said his government had forwarded a new plan to its European partners.

German Chancellor Angela Merkel and French President Francois Hollande met with Greece’s international creditors including ECB President Mario Draghi on Monday and were said to have agreed on their final offer to avoid a Greek default.

Yet at the same time, Dutch Finance Minister Dijsselbloem, who leads the euro-area finance ministers’ group, said the parties are still far from any agreement.

The flurry of comments and reported behind the scenes activity sent the euro careening higher as stops at 1.1000 and 1.1050 were triggered and the united currency surged almost  three figures top to bottom and 160 points from the New York open.  

Greek bonds advanced, reversing a two day drop, with yields on the two-year note losing 169 basis points to 23.21 percent in London afternoon action.  The 10-year bond fell 20 basis points to 11.30 percent.

Trading volume on Geek government bonds is negligible with no turnover through the central bank's secondary electronic exchange on May 29th according to Athens News Agency as reported by Bloomberg. Greek markets were closed on Monday for a holiday. 

"The difference between the bid and offer yields for Greece’s two-year securities, a measure of the bonds’ liquidity, was about 105 basis points. In contrast, the spread on similar-maturity German notes, the euro region’s benchmark sovereign securities, was less than 0.5 basis point," according to data compiled and reported by Bloomberg.

The Athens Stock Exchange fell 20.42 points, 2.47 percent, to 804.96 and is off 6.2 percent since last Thursday. European equites were largely negative with London's FTSE losing 0.36 percent, the German DAX shedding 0.94 percent and the CAC 40 in Paris slipping 0.41 percent. The Dow was down 3 points at 18037 at 2:41 pm.

Greece has a 300 million euro ($335 million) payment to the IMF due Friday. Although Greek Prime minister Alexis Tsipras has said the county can make the payment there are doubts that this is true, and many more questins that the country can make other payments later in the month. 

The euro was trading at 1.1172 at 1:45 pm in New York.

 

Joseph Trevisani

Chief Market Strategist

WorldWideMarkets Online Trading

Charts: Bloomberg

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