The markets remain focused on the deadline for the Greek debt swap, Thursday at 14:00. According to the terms of the Private Sector Investors’ agreement, a minimum of 66% participation is required before the debt swap can proceed with 75% needed to avoid the use of collective action clauses. These clauses would compel the remaining investors to participate in the debt swap. This compulsion would be classed as a default event triggering claims under credit default swaps, which will create turmoil in the markets. Despite some recent improvements in data from the Eurozone, the region still faces its second recession in less than three years. The second estimate of Eurozone growth for the 4th quarter was unchanged with a contraction of 0.3%. Investments fell by 0.7%, largest fall since 2009, and household spending fell by 0.4%.
Risk appetite was definitely off in the FX markets yesterday ‘riskier’ currencies and EUR fell on the run up to Thursday’s Greek deadline. EUR/USD hit a month low of $ 1.3101 during New York trading before making a modest recovery; GBP/USD hit a 2 week low of $1.5694 before making a modest recovery, currently above $1.5730.
Thursday’s central bank meetings will surely be over shadowed by the Greek show. This week could present good opportunity to buy EUR and some of the high yield currencies such as AUD, NZD and ZAR.
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