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Kicking the Grexit can

The ECB has come to the rescue of Greek banks once again by increasing the cap on ELA from €65b to just over €68b. This does not resolve the problem of deposits being depleted as people continue to withdrawal funds from Greek banks and of course the wider issue of a new deal being negotiated to prevent a Grexit. Today it is expected that a six month extension to the existing bailout will be accepted today in order to give more time to negotiate a more permanent deal later in the year. It’s a situation that is all too familiar for investors as despite a change in government of Greece, little is changing in terms of its future economic prospects. The Germans refuse to let them rein in austerity and write off debt whilst the Greeks continue to push for debt write downs. The expected deal has allowed the decline of EURUSD to remain contained with the 1.1400 still holding strong despite several moves below it.

At the time of writing EURUSD sits at 1.1420 with support also coming from last night’s FOMC minutes which were less hawkish than many had anticipated leading to a reversal of the recent gains seen in US Treasury yields that had rallied so strongly since the January nonfarm payroll earlier this month. This also caused USDJPY to retreat back below the 119.00 level sitting at 118.70 this morning.

Today things are quiet on the economic data front but EU consumer confidence this afternoon and the US Phili Fed manufacturing survey should be watched.

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