Euro Gains as European Troika Finishes Review of Greece
The European Commission, the European Central Bank, and the Internationally Monetary Fund – collectively known as the Troika – released a statement today on the Fourth Review Mission to Greece, which helped prop up the Euro across the majors amid renewed optimism for sovereign debt relief. While the Euro-Swiss pair remained relatively unchanged, the Euro-Dollar pair jumped 25-pips up to as high as 1.4596, at the time this report was written.
EUR/USD 1-minute Chart: June 3, 2011
Charts created using Strategy Trader– Prepared by Christopher Vecchio
The Troika’s release found that significant progress had been made in the area of fiscal consolidation, which had been achieved to a satisfactory level during the first year of the adjustment program. However, as noted in the report, further fiscal and “broader structural reforms” are still necessary to slash the deficit in order to achieve a sustainable economic recovery.
The release also noted:
Regarding the outlook, the recession in 2010 was slightly more pronounced than what was anticipated. But there have been encouraging signs recently, in particular a notable pick-up in exports. Unit labour costs are set to decline further, supporting the strong export dynamics, and inflation is on a declining trend. We expect the economy to stabilize at the turn of the year.
In the fiscal area, further sustained deficit reduction will require comprehensive fiscal structural reforms. The government has committed to an ambitious medium-term fiscal strategy that will enable it to maintain its 2011 and medium-term fiscal targets. This strategy includes a significant downsizing of public sector employment, restructuring or closure of public entities, and rationalization in entitlements, while protecting vulnerable groups. On the revenue side, the government will reduce tax exemptions, raise property taxation, and step up efforts to fight tax evasion.
Now, it appears that upon completion of the Troika’s review, the IMF’s Executive Board and the Eurogroup will meet in order to determine how much and when the next tranche available to the embattled nation will occur. The report pegs the start date for further funding in early July.
Written by Christopher Vecchio, Currency Analyst
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