Greece gets yet another Lifeline

The much awaited deal for keeping the Greek economy afloat was reached after the EU and the IMF bridged their differences and agreed to a debt reduction deal, paving the way for the next aid tranche to Greece. However, with much of the optimism already priced in, the Euro did not receive a boost against the majors this morning. In the UK, sequential third quarter GDP figures were left unchanged. Across the Atlantic investors have their plate full, with a raft of US economic releases due later today including durable goods and consumer confidence data.

Pound Sterling – UK Markets

The Pound has continued to trade near its recent lows against the Euro in today’s trading session amid optimism over the European finance ministers’ agreement for Greek aid. Meanwhile, data just out has revealed that sequential third quarter GDP data was left unchanged, while annual GDP figures were revised a tad lower. However, higher risk appetite on account of the Greek accord has led Sterling to post gains against the US Dollar. In a noteworthy development, the current Bank of Canada Governor, Mark Carney, has been appointed as the next BoE Governor and is set to take office from July 2013. It is hard to draw conclusions about his likely policy stance, but it is known that he advocates flexible inflation targeting, offering support to the belief that the BoE may not pursue its aggressive easing stance seen earlier during the year. With no domestic economic data on offer in today’s trading session, all eyes will be on economic data from the US for further direction.

US Dollar – US Markets

The US Dollar nudged lower against most of the high yield currencies, as “risk on” sentiment was back on the table after European leaders agreed to a deal to unblock the next aid tranche to Greece, staving off fears of Greece leaving the single currency union. However, concerns over the “fiscal cliff” issue continue to pose a threat to the greenback, as Republicans in the US Congress continued to oppose the income tax rate increases for the wealthy that Democrats seek. The focus is likely to revolve around the US political arena, wherein the “fiscal cliff” deadline is nearing with political parties still at odds. Meanwhile, the devastating impact of Hurricane Sandy was visible, as both the Dallas Fed manufacturing index and the Chicago Fed national activity index slipped into negative territory. Today features a heavy economic calendar, with durable goods orders expected to show a drop, following the sharp spurt seen in September. Meanwhile, the consumer confidence reading will be closely watched for further evidence about the rise in consumer morale during the initial phase of the holiday period. House price data and the Richmond Fed manufacturing index are other releases to watch for in today’s session.

Euro – European Markets

The much awaited deal for Greece finally saw the light of day, as European policymakers broke the deadlock by agreeing to cut Greece’s debt to 124% of GDP by 2020. Moreover, they unveiled measures to ease pressure on the debt laden nation by lowering interest rate on Greece’s debt, extending all loan maturities and deferring interest payments on bailout fund loans. Against this backdrop, the Euro moved higher against its peers and briefly tipped the 1.30 mark against the US Dollar in today’s session. However, market participants have scaled back their optimism amid the general negativity surrounding the Eurozone economy and the euro has begun to decline again. With issues surrounding Greece’s fiscal crunch temporarily resolved, focus will revolve around a flurry of economic releases from the US later today and negotiations over the “fiscal cliff” for further direction in the near term. Moreover, a slew of major German economic releases and the Eurozone unemployment data scheduled later this week will garner market attention.

Other Currencies – Highlights

The Kiwi Dollar is trading marginally higher against the US Dollar this morning, as traders breathed a sigh of relief after European policymakers managed to reach a consensus for reducing Greece’s debt, paving the way for the release of the next aid tranche for Greece. Meanwhile, traders seemingly shrugged off weak economic data from the island nation. Data revealed that trade deficit narrowed less than expected for October, on account of a slower pick up in exports. Moreover, the Reserve Bank of New Zealand’s survey showed that one-year consumer price inflation expectations fell for the fourth quarter, offering room to the central bank to lower its benchmark interest rate further. With little on the domestic economic calendar during this week, all eyes are likely to hover over the US macro data and developments on the “fiscal cliff” issue.