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    European Session – Euro fades post-EU-Greece agreement gains to fall below 1.11

    Following the EU Summit that resulted in a unanimous agreement early on Monday for a Greek bailout, the euro rallied on relief that a Grexit has been avoided and measures have been taken to prevent Greece from going bankrupt.

    The euro spiked to reach close to the key 1.12 level and peaked at 1.1196 when the headlines broke but has since fallen to 1.1034.

    The near-term risk now lies in the Greek parliament having to pass six reform bills by Wednesday July 15 and then there is also a ratification of the final bailout deal in several EU national parliaments. Once the Greek government has legislated reforms, this will open the way for negotiations to begin on the new financial aid worth around 86 billion euros.

    Meanwhile, Greek banks remain closed for the third week and capital controls are expected to remain in place for a long time. The Greek government will decide on Wednesday when to reopen banks. The European Central Bank announced today it has kept the ceiling of ELA (emergency liquidity assistance) unchanged.

    Sterling rose in tandem with the euro after the announcement of the EU Agreement on Greece but after hitting a high of 1.5588 versus the dollar, it fell to 1.5519. Focus now shifts to risk events related to the pound, which include Tuesday’s UK CPI and Wednesday’s jobs data. Wage growth will be closely watched. Bank of England Governor Mark Carney’s speeches will also be closely monitored on Tuesday and Thursday. Carney is due to testify on the UK Financial Stability Report before the Treasury Select Committee.

    The dollar rallied against the yen to a high of 123.48, the highest since early July as general market sentiment was better today. It has touched as low as 122.15 earlier in Asia. Meanwhile, several events this week will be risks for the dollar/yen pair. These risks include the Bank of Japan policy meeting on Wednesday and Fed Chair Yellen’s mid-week testimony but also US CPI on Friday. Today’s US economic calendar only has secondary data on the Federal budget.

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