BZ: Euro Stumbles as Euro-zone Finance Ministers Reach Impasse
The Euro softened in the overnight as Euro-zone finance ministers failed to reach an agreement that would release a fifth tranche that would prevent Greece for defaulting on its debts.
The Euro softened in the overnight as Euro-zone finance ministers failed to reach an agreement that would release a fifth tranche that would prevent Greece for defaulting on its debts. The impasse comes as a surprise to the market after it appeared that talks had progressed well last week, with Germany's Finance Minister Wolfgang Schaeuble's deputy, Joerg Asmussen, stating that he expected that European finance chiefs would “find an agreement that the IMF and the Europeans can pay out the next tranche for Greece” at an emergency meetingin Luxembourg on Sunday, June 19. Unsurprisingly, however, such a deal could not have been reached, as the core Euro-zone nations firmed their demands for private-sector involvement in the bailout of Greece.
The market appeared disheartened by the news, with the Euro falling for the first time in three days versus the U.S. Dollar, while sinking for a fourth consecutive day against the Japanese Yen, its longest losing streak against its Pacific Rim counterpart in over six-weeks. Similarly, the Swiss Franc and the U.S. Dollar were the two strongest major currencies in the pre-North American session hours, with the Australian Dollar and New Zealand Dollar depreciating the most, as market sentiment shifted towards a risk-averse position.
The Euro-Franc had fallen over 100-pips in the overnight on the news, though the depreciation was pared back a bit on news that the European Financial Stability Fund would be increased to guarantee €780 billion in the future, up from €440 billion currently. Similarly, Luxembourg's Jean-Claude Juncker, head of the group of Euro-zone finance ministers, noted that he believed that the Greek government was doing all that it could to ensure the country's agreement to the conditions in order to receive aid, stating “[t]he Greek parliament has to know that this has to be done.”
