Greece failed to reach an agreement with its creditors before a meeting with European Union leaders.
Greek Prime Minister Alexis Tsipras met with creditors to discuss how to alter the terms of previously acquired debts, with the hopes of getting creditors to agree on a variety of reforms that would keep the nation solvent. While Greece’s creditors refused his offer, they unanimously agreed on a credit deal with Greece, which the nation rejected.
The global capital markets remain subdued for the most part despite the fact that paralysis in Europe is bringing Greece to the very brink. There will be no agreement today, and the finance ministers will meet again tomorrow in what Merkel and Hollande have called a “decisive meeting.” The implicit threat is that if no agreement is reached, officials will begin preparing for a Greek default.
Reports that Greek officials sent the wrong document to European officials have been denied. Today’s Euro group meeting, and even more importantly, the emergency heads of state meeting is the only focus today. Initial indications from an aide to Juncker and EU’s Moscovici are supporting that progress will be achieved today.
The US dollar is trimming its weekly loss against the most of the major currencies, while extending its gains against the two currencies that it has appreciated against this week, namely the New Zealand dollar and the Norwegian krone. Both countries have cut rates in past fortnight and have signaled investors should expect an additional cut in rates.
Through the venomous comments and erosion of trust, the broad framework of what couple proves to be a workable compromise over Greece’s financial crisis may be emerging. This is not to suggest that the Eurozone finance ministers meeting will reach any important decision.
One of the main issues dominating the G7 was the Greek bailout. For the seven leaders attending the Bavarian summit, resolving the debt crisis in a way that is acceptable to Greece and its international creditors remains at an impasse. Both Barack Obama and Angela Merkel called on the Greek government to implement economic reforms.
While securing a new deal is important, much of the focus has been on how to deal with Greece’s debt. Ultimately, however, Greek debt will not be tackled by cutting government spending alone.
The losses the US dollar suffered yesterday extended into Asia today. The dollar stabilized in Europe. Short-term technical indicators warn against expecting a deep retracement today. Support for the euro is near $1.12. A break of $1.5260 could see another half a cent decline for sterling. Dollar support is against the yen is JPY123.60-80.
The euro is steady after pulling back from yesterday’s high near $1.1380. German bund yields are slightly firmer today, but also off the 1.00% level approached yesterday. Against the other major currencies, the dollar is slightly firmer, as the participants turn cautious ahead of the US jobs data.
The US dollar is recouping some of yesterday’s outsized losses. The euro was unable to extend yesterday’s push toward $1.12, perhaps with the help of some fragile stability in the German bund after yesterday’s dramatic slide. Disappointing UK service PMI saw sterling slide after briefly and narrowly taking out yesterday’s high. The dollar found a base near JPY123.80, from which has returned to the JPY124.40 area. The yen’s performance seems to be more a function of cross activity today.
Greece has run out of funds and has failed to secure support from the European Union. As a result, the indebted nation may not make its payments for an International Monetary Fund loan due by the end of this month.
The Greek government must make payments worth around 1.6 billion euros, or $1.77 billion, in June, yet it lacks the cash in its own coffers to make those payments and pay civil servants and Greek government employees, which Prime Minster Alexis Tsipras said would receive primary attention over the debts.
“A High Price”
