Bank's Afternoon Decision

This is the key question for currency traders right now. The fundamental back-drop looks challenging for the euro. Although the Merkel/ Hollande rift seems overdone to us, Greece is the real problem. The leader of the New Democracy party announced late last night that he had failed to form a coalition government. The baton is now passed to the leader of the radical left wing Syrizia party, which now has three days to form a government. If this fails then another round of elections is on the cards for June. However, these elections could coincide with Greece running out of money, which makes them a much riskier prospect than the elections held last weekend. Election deadlock However, why has the euro not fallen through the floor? Back in 2010 the mere mention of the word bailout caused ...

(Reuters) - The euro edged slightly lower against the U.S. dollar after hitting a two-month high on Wednesday as investors awaited firm signs Greece will reach a deal on a second international bailout. Europe's common currency shuttled between small gains and losses throughout the afternoon New York session as Greece's debt talks dragged on. The market has become driven mainly by headlines out of Europe, similar to what happened late last year. Prospects of a deal on a second international bailout for Greece rose when euro zone finance ministers were summoned to talks in Brussels while Greek political leaders met to approve a tough reform and austerity program. Greece's leaders must agree to the terms for the new 130 billion euro ($172.3 billion) rescue which Athens needs to avoid going ...

(Reuters) - The euro touched a two-month high against the U.S. dollar in choppy trading on Wednesday as participants fixated on the outcome of a meeting of Greek political leaders on the country's second bailout package with most anticipating a deal will ultimately be completed. Europe's common currency shuttled between gains and losses as Greece's talks dragged on. The market has become driven mainly by headlines out of Europe, similar to what happened late last year. After repeated delays which have prompted warnings that the euro can live without Athens, Greek political leaders finally gathered to agree a reform deal in return for a new EU/IMF rescue plan to avoid a chaotic default. Greece's leaders must agree to the terms for the new 130 billion euro ($172.3 billion) rescue which ...

(Reuters) - Greek resistance to the strict conditions attached to a bailout fund on Tuesday sapped recent momentum in markets spurred by hopes the global economy is improving, and the euro fell on renewed fears of a messy debt default. The Australian dollar leapt to a six-month high but stocks turned negative after the central bank held rates steady at a review when markets had positioned for a rate cut. Opinions were divided over whether the wrangling over Greece's debt restructuring talks would eventually be resolved or trigger contagion across other vulnerable euro zone countries, tempering risk-taking investments. MSCI's broadest index of Asia-Pacific shares outside Japan rose as much as 0.4 percent to its highest since September 1, then reversed direction, and last stood barely ...

The Week Ahead Highlights Risk rebound may not last long FOMC set to disappoint on QE3 SNB re-affirms EUR/CHF floor Risk rebound may not last long Risk sentiment stabilized in the past week as several European debt auctions saw lower borrowing rates and solid demand. Stocks took heart and rallied, while the USD lost ground and the beleaguered EUR recovered as extreme short-positions were unwound. Sentiment was also buoyed on the prospects for a final resolution on the Greek government debt swap. But as of Friday afternoon, a final Greek debt deal has yet to be announced and there is still potential for another impasse. Even the reported 32-cents/euro pricing agreed to by private creditors represents a much larger haircut than originally agreed, keeping open the risk that ...

Stocks rose on Thursday, boosted by a rosier U.S. economic outlook and rising European banks, while the euro struggled versus the U.S. dollar on concerns that the euro zone debt crisis will only continue to intensify. Volatility was expected as trading volumes in major markets were thin. Stocks advanced on Wall Street after the U.S. government reported that new claims for unemployment benefits dropped to their lowest in more than 3-1/2 years, and stronger business investment and a fall in inventories pointed to a pickup in output in the current quarter despite a lower reading in revised Q3 gross domestic product. U.S. consumer sentiment improved in December to its highest level in six months as Americans felt better about the economy's prospects for the year ahead. "Clearly the year ...

(Reuters) - Oil fell on Friday and headed for a weekly loss as Europe's debt crisis continued to weigh on prices, while a drop below a key technical level by U.S. crude added to the bearish sentiment. U.S. crude fell below its 300-day moving average of $93.20 after testing support in the area the previous session and earlier on Friday. Both Brent and U.S. crude futures received a boost early from a weaker dollar and a higher open by U.S. equities, which were lifted by a brighter U.S. economic outlook. But the euro turned negative versus the dollar and stocks on Wall Street also -wobbled. Oil prices have gyrated this week. Brent shot up to $111.10 on Tuesday on fears about restrictions or disruptions to the key Strait of Hormuz shipping lane and then plunged more than 4 percent on ...

(Reuters) - The ECB is expected to cut rates and unveil a new package of bank aid on Thursday, with markets also watching for any hint it will intensify its bond buying support for the bloc's struggling periphery, setting the stage for a critical euro zone summit. The European Central Bank meeting comes just a day before a supposedly make-or-break EU summit which will aim to agree on key rule changes to anchor coercive budget discipline for the 17 countries that share the euro. The ECB is hoping to convince the bloc's governments to give Brussels more say on their spending and accept automatic sanctions if they step out of line -- issues it sees as crucial to fixing the region's problems long-term -- by dangling the prospect of scaling up its purchases of troubled states' debt. A ...

The euro gained versus the dollar and yen on Thursday as optimism that Greece will ditch a referendum on its bailout package outweighed an unexpected interest rate cut by the European Central Bank. The ECB unexpectedly lowered key interest rates by a quarter percentage point to 1.25 percent, its first cut since May 2009, citing the euro zone's worsening debt crisis. While lower rates make the euro less appealing to higher yielding currencies, encouraging news out of Greece had investors embracing risk. Greek Finance Minister Evangelos Venizelos called on the Greek government to categorically rule out a referendum on a crucial bailout plan and do everything to implement the deal. Greek Prime Minister George Papandreou earlier said he was open to scrapping the referendum if the opposition ...