Euro Moderately Higher on Possible Greek Negotiations, Budget Reform

Weekend Developments

• Greece negotiations with creditors said to be near resolution
• Private sector nears agreement with new yields on rolled-over old debt
• Greece rejects German plan of budget reviews

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The Euro and other European currencies strengthened this morning against the US dollar in low liquidity trading on reports that negotiations with private lenders may reach a deal by the end of next week. Major points of disagreement were reported to be yields on new Greek debt exchanged for old ones, as well as the potential rate of recovery by those lenders if Greece were to default. A private sector agreement will open up the next tranche of bailout funds to Greece for the country’s March 20 payments.

The Greek government has also rejected a call from Germany that will allow other members sharing the single currency to review each other’s budgets before passing. Although Germany is calling the move as a move towards more accountability, Greece has labeled the plan as damaging to its sovereignty. However, markets will continue to focus on the outcomes of the Greek PSI, as well as effects it may have on private lender negotiations with Portugal and Ireland.

At the time of writing, the Euro is leading gainers higher against the greenback along with the British pound and Swiss franc. Oceanic currencies the Australian and New Zealand dollars are seeing weakness on reports that inflation is expected to continue softening in both countries, opening up the possibility of rate cuts by both respective banks. Additionally over the weekend, RBNZ Governor Bollard has said he will not seek another term as the leader of the central bank.

-- By David Liu, DailyFX Research