The euro opened at 1.1091 dollars on Monday in Asian trading, down 0.5% from Friday’s close. After 14 hours of talks lasting into the night, negotiations between Greece and its creditors were still ongoing on Monday morning. Despite Greece’s latest effort to come up with a credible list of reforms, Eurozone leaders said that trust in the Greek government to implement the reforms was the main issue.
One of the proposals that was put at the discussions was a German proposal that Greece should temporarily exit the Euro for five years but this was dismissed by the French president. It is believed that the talks have now centred on what reforms Greece needs to pass through the Greek parliament before talks can officially be opened on a third-bailout of up to €86 billion. Some of the measures Greece needs to approve include reforming pensions, streamlining VAT and giving legal independence to the Greek statistics office.
The euro had stabilised around 1.1130 against the dollar but jumped to 1.1191 on reports that a deal had been reached. The single currency also rose against the pound to 0.7199 and against the yen to 137.58. The aussie and the kiwi were firmer against the dollar at 0.7458 and 0.6738 respectively on signs that the shares slump in China is stabilising.
China’s stock market started the week positively, gaining over 2% after data out this morning showed Chinese exports rising by 2.8% in June. Also supporting equities were further measures taken by Chinese authorities to deal with irregularities in margin lending. Over in Japan, final industrial production figures came in unrevised from previous estimates of -2.1% in June.
The US dollar started Monday trading on a steady path but soon reversed downwards against most major currencies. Remarks on Friday by Fed Chair Janet Yellen which were on the hawkish side did not have a major impact on the greenback. Yellen said that although there is still some slack in the labor market, the recovery in the US economy should be strong enough for the Fed to start raising its funds rate later this year. There was no mention of what impact the equities slump in China would have on the US economy but Yellen did cite the situation in Greece as a possible cause of uncertainty in the near term. The greenback was higher against the yen in late Asian trading at 123.09 but moved lower against the pound at 1.5542 per dollar.
There is very little data scheduled for today so once again ongoing discussions with Greece are likely to dominate the headlines. The Eurogroup is expected to meet later today to discuss finalizing the details of the agreement as well as to provide bridge financing for Greece to enable it to meet its debt repayments over the summer, including its upcoming instalment to the European Central Bank.
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