The single currency opened around 50 pips lower this morning on the back of yet another Greek deadline not being a deadline after all. Furthermore, EURUSD regained most of that opening gap lower through the course of the Asia session. As we write, there are signs that a deal is has been agreed, but there have been no details as yet with regards to just what this may entail. EURUSD has managed to pull above Friday’s closing levels, but further volatility is likely through the course of the day as further details emerge.
Whatever emerges, it’s clear that the institution of the single currency has been damaged by the on-going negotiations over recent weeks and months. The issue of debt relief, so pushing maturity further into the future or writing off debt, will probably remain in play in the second half of this year. So whilst it would be great to move on from talking about Greece, it could well prove tough to move on in the coming weeks and months. There is also the issue of what domestic political fallout there is, primarily Greece and Germany, as a result of the deal agreed. For FX, so long as the deal proves to be sustainable in the short-term, it naturally makes for a better backdrop for the single currency and will certainly reduce volatility, both actual and also implied volatility in the options market. The other issue for markets at the moment, namely China, has also shown some signs of improvement overnight, with stocks up around 3%, with the number of companies halted from trading falling. Trade data for China was also positive overnight, with exports back into positive territory on the YoY measure, having been in negative territory since March of this year. EURJPY has seen the biggest moves as a result of overnight developments, up to 137.80 initially, from a low of 133.31 in the middle of last week.