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European Session – Euro lifted on possible Greek debt extension

Posted on February 10, 2015 by the XM Investment Research Desk at 3:22 pm GMT

greece_flag_world_cup_2014_picsThe euro was the main market focus today as political developments regarding the Greek debt renegotiation proposals to the country’s international creditors continue to be the main driver of the single currency.

Markets await the unofficial Eurogroup meeting on Wednesday, ahead of the EU Summit on Thursday. Greece is at the top of the agenda as it is seeking a new debt agreement with the Eurozone that will allow it to abandon many of the austerity measures imposed since 2010 by the troika (European Central Bank, European Commission and International Monetary Fund).

There were unofficial reports today pointing to a possible debt extension of 6 months in order to give time for European and Greek officials to renegotiate the debt. The existing bailout package expires at the end of February.

The reports drove Greek shares higher and pushed the yields on Greek bonds sharply lower, while the euro spiked up to rise back above the key 1.13 level.

After opening the European session at 1.1328, the euro dropped to 1.1272 before bouncing to 1.1336 at the time the news reports of a possible debt extension were released. Against the yen, the euro rose to 135.27, moving off a low of 134.03.

The UK released some mixed data today. Manufacturing production was better-than-expected, rising 0.1% in December, compared to forecasts of a 0.1% drop. November output rose 0.8%. However, Industrial output fell 0.2%, confounding expectations for a 0.3% rise.

Sterling reacted favourably to the data, rising to highs of 1.5238. Thursday’s Bank of England Inflation report will be the main risk event for the pound this week.

The dollar rallied against the yen, as risk appetite improved in the markets. After a pause from Friday’s post-nonfarm payrolls rally, the pair extended higher today to reach 119.61.

 

 



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