##{"id":59492,"date":"2012-02-13T10:53:10","date_gmt":"2012-02-12T23:53:10","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2012\/02\/13\/euro-may-not-rise-on-greek-accord\/"},"modified":"2012-02-13T10:53:10","modified_gmt":"2012-02-12T23:53:10","slug":"euro-may-not-rise-on-greek-accord","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2012\/02\/13\/euro-may-not-rise-on-greek-accord\/","title":{"rendered":"Euro May Not Rise On Greek Accord"},"content":{"rendered":"<p>\n\t<strong>Euro May Not Rise On Greek Accord, Pound Braces For More QE<\/strong><\/p>\n<p>\n\tBy <span>Ilya<\/span> <span>Spivak<\/span>, Currency Strategist, <span>FXCM<\/span><\/p>\n<p>\n\t<u><strong>Talking Points<\/strong><\/u><\/p>\n<ul>\n<li>\n\t\t<strong>Overnight Price Action Hints Traders Bet Greek Bailout Deal to be Reached<\/strong><br \/>\n\t\t&nbsp;<\/li>\n<li>\n\t\t<strong>Euro May Struggle to Find Support if <span>ECB<\/span> Dithers on Boosting Bank Defenses<\/strong><br \/>\n\t\t&nbsp;<\/li>\n<li>\n\t\t<strong>British Pound Threatened with Bank of England Likely to Expand QE Efforts<\/strong><\/li>\n<\/ul>\n<p>\n\t<strong>Greece<\/strong> remains in focus heading into European hours as traders continue to wait for a final deal on the country&rsquo;s second EU\/IMF bailout. <span>Eurozone<\/span> finance ministers are set to meet today in Brussels in an attempt to hammer out remaining differences, with the latest discussions reportedly marred by disagreement regarding cuts to Greek pension plans. For their part, traders appear relatively sanguine. The <strong>Euro<\/strong> rose to the highest in two months overnight while the safe-haven <strong>US Dollar <\/strong>and <strong>Japanese Yen<\/strong> traded broadly lower, reflecting expectations that an agreement will be reached.<\/p>\n<p>\n\tAs we <a href=\"http:\/\/www.dailyfx.com\/forex\/fundamental\/daily_briefing\/session_briefing\/euro_open\/2012\/02\/08\/FOREX_Euro_Outlook_Bearish_Regardless_of_Greek_Fiasco_Outcome.html\">noted yesterday<\/a>, this makes some sense. EU banks borrowed just shy of &euro;500 billion via the <span>ECB<\/span> 3-year <span>LTRO<\/span> in late December while Greece&rsquo;s has close to &euro;<span>300billion<\/span> in outstanding bonds, meaning a market-wide credit crunch (akin to the one sparked by the 2008 collapse of Lehman Brothers) is now relatively unlikely even in the case of an outright default. Greek politicians no doubt understand this means their ability to hold the EU hostage with the threat of region-wide meltdown has been diminished, so officials from the so-called &ldquo;troika&rdquo; (the EU, <span>ECB<\/span> and the IMF) are likely to be less accommodative of their demands than previously. From that perspective, Athens must choose which option &ndash; deeper austerity or an outright default &ndash; poses greater political risks, with markets seemingly reasonable in their estimation that the latter will be judged as harder to sell to the electorate.<\/p>\n<p>\n\tImportantly, it is by no means guaranteed that the Euro will necessarily find support in a Greek bailout deal being finally complete. Indeed, the single currency&rsquo;s buoyancy over recent days suggests much of that may be priced in already. With that in mind, the spotlight turns to the <strong>European Central Bank <\/strong>monetary policy announcement. Markets expect no movement on benchmark interest rates, which generally makes sense considering regional economic data has been on a cautiously improving trajectory relative to expectations since September. The larger point of interest will be what (if any) additional measures are taken to strengthen the firewall keeping a sovereign default from becoming a wider banking and credit crisis.<\/p>\n<p>\n\tAs mentioned above, the banks have been given enough through <span>LTRO<\/span> to cover Greece. Another similar outing at the next 3-year repo later this month will probably cover <strong>Spain<\/strong> (close to &euro;500 billion in outstanding debt). Crafting strong-enough defenses to withstand serious stress in <strong>Italy<\/strong>, where the size of the hole left on banks&rsquo; balance sheets in the worst case scenario is somewhere between &euro;1.5-2 trillion, will prove substantially more difficult however. Rome must refinance &euro;54.5 billion in maturing debt over the next 30 days alone and boasts the dubious honor of having the highest debt-to-GDP ratio after Greece in the Euro area, so traders would not be hasty in asking how the <span>ECB<\/span> plans to protect the banks if Italy begins to totter.<\/p>\n<p>\n\tElsewhere, the <strong>Bank of England<\/strong> is expected to expand its quantitative easing (QE) program with another <span>&pound;50<\/span> billion in asset purchases, an outcome that may prove to weigh on the <strong>British Pound <\/strong>as traders size up the exchange-rate implications of further dilution of the money supply. Economic data has performed increasingly poorly relative to expectations since early December. Meanwhile, priced-in medium term inflation expectations declined (albeit narrowly so) over recent months despite <span>Mervyn<\/span> King and company&rsquo;s <span>&pound;75<\/span> billion boost to QE in October. Economists&rsquo; median expectations for UK economic growth in 2012 have been in precipitous decline for some time, so the risk of overshooting with too much stimulus at this point is arguably far smaller than that of being too timid.<\/p>\n<p>\t<img decoding=\"async\" alt=\"\" src=\"http:\/\/www.fnarena.com\/ckfinder\/userfiles\/images\/dailyfx13-2.jpg\" style=\"width: 700px;height: 766px\" \/><\/p>\n<p>\tThe views expressed are not FNArena&#039;s (see our disclaimer).<\/p>\n<p>\n\tFor real time news and analysis, please visit http:\/\/www.dailyfx.com\/real_time_news<\/p>\n<p>\n\t<span>DailyFX<\/span> provides <span>forex<\/span> news on the economic reports and political events that influence the currency market. Learn currency trading with a free practice account and charts from <span>FXCM<\/span>.<\/p>\n<p>\n\twww.dailyfx.com<\/p>\n<p>\n\t<em><strong>Disclaimer<\/strong><\/em><\/p>\n<p>\n\t<em><u><span>Forex<\/span> Capital Markets is headquartered at Financial Square 32 Old Slip, <span>10th<\/span> Floor, New York, NY 10005 USA.<\/u><\/em><\/p>\n<p>\n\t<em>Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. 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All information contained in this e-mail is strictly confidential and is only intended for use by the recipient. All e-mail sent to or from this address will be received by the <span>FXCM<\/span> corporate e-mail system and is subject to archival and review by someone other than the recipient.&rdquo;<\/em><\/p>\n<p>\n\t<strong>Technical limitations<\/strong><\/p>\n<p>\n\t<strong><span style=\"font-style: italic\">If you are reading this story through a third party distribution channel and you cannot see charts included<\/span>, <em>we <span>apologise<\/span>, but technical limitations are to blame.<\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Market analysts at FXCM suggest a Greek Accord may not be enough to push the euro higher, while the British pound may come under pressure from more QE measures.<\/p>\n","protected":false},"author":9,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[10],"tags":[29],"acf":[],"_links":{"self":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/59492"}],"collection":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/comments?post=59492"}],"version-history":[{"count":0,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/59492\/revisions"}],"wp:attachment":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/media?parent=59492"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/categories?post=59492"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/tags?post=59492"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}