Euro rallies on more positive Greek talks

Monday’s headlines were all about the Greek negotiations as new proposals were submitted to creditors yesterday, with Greece now hopeful of a deal within days. It is clear that both creditors and debtors in this case are extremely keen for a deal of sorts to be put together to prevent the catastrophic fallout of a Greek exit from the Euro-zone. It is now predicted to be as much as 75% on that a deal will be agreed this week with creditors positively receiving the latest proposal from the Greek Prime Minister. Both stock markets and Currency markets rose yesterday afternoon on the hope and optimism of a pending agreement.

GBP/EUR was the big loser with extra selling of the pound to accompany the strong Euro. The 1.40 resistance was tested early morning before dropping over 1% throughout the day, and then recovering overnight. The selling at 1.40 has been very aggressive this year with each failure resulting in a 4-5 cent loss within a week or 2, something that would be expected again assuming that a deal is reached this week with Greece. The Greek situation has been softening a stronger Euro in recent months and once these concerns have been put to bed, we could even see GBP/EUR test lows of 1.30 in the coming months.

The simple position of GBP/EUR currently is that rates stand to lose far more off a positive Greek outcome than they could gain off a negative one. Yesterday’s movement was an insight to the markets take on a potential deal and so opportunities to buy at these higher levels may not be around for much longer. A 10% deposit can hold your rate for anything up to 1 year in advance, just ask about our Forward Contracts.

Today sees a couple of economic releases that are unlikely to significantly impact exchange rates with larger issues in focus. Euro-zone Manufacturing and Services PMI will be announced at 9:00am and US Durable Goods Orders is released a 1:30pm.