Talking about winning the battle and not the war… A deal was reached between Greece and its creditors on Friday for a four month extension to rescue loans to Athens in exchange for fiscal reforms there. By Alex Tsipras’ own admission though, the toughest negotiations are still ahead of them.
For the time being though, Greece needs to write a to-do list of reforms that will keep Germany happy enough to want to write a check in the next few days. Easy targets for Athens are tax evaders, of which there are plenty, and corruption, which is still pretty rife, despite four years of governments ‘clamping down’ on it. According to sources, Greece isn’t going to put any revenue targets against these crack downs, instead Europe will have to take Greece’s word that they’re handling it.
Markets were fairly predictable on the news, buying into equities and selling out of risk avoidance assets such as US treasuries and German Bunds.
You could tell by the forex dance floor though that nobody is entirely convinced that Germany will sign off on a deal and,even if they do, what happens in four months’ time? Mr. Euro rose a little on Friday just to go back down and lose the up-momentum by Sunday night. Despite some brokers warning a major typhoon gap coming up after Friday’s deal, Mr. Euro continues his crab-like moves and pays no attention to Greece deals whatsoever.
According to a CNBC analyst, the Greek economy is not strong enough to support, and that the real concern of a possible Greek exit (Grexit) could be a closer relationship between Russia and China… Which is definitely something that the west wouldn’t like.
With most markets in Asia still closed for Chinese new year, the Sunday night open wasn’t the busiest session. London session saw a worse than expected German Ifo Bussiness Climate which contributed to Mr. Euro’s down moves and we have pretty much no more economic gossip to shake the currency pairs on the forex dance floor.