EUR USD (1.2860) At first glance, the news that IMF is being put to work yet again to gather resources to tackle the eurozone crisis, looked positive, the euro rallied. However, what looked ostensibly positive actually also implied that the eurozone funding problems still exist and, worse, that none of the European countries were taking the lead in financing their own rescues. As the US and Canada yet again voiced their reservations about contributing to the IMF, the rally in the euro faded. The market was also sensitive to news about torturous negotiations regarding the Greek PSI. Reassurances by Greek politicians contrasted with comments coming from private creditors, who play down the probabilities of a credible and acceptable outcome. It is no wonder that investors struggle to get a more accurate handle on the Greek problem. Yesterday, therefore, the result was that the rally in euro was largely perceived as tenuous. We admit that the full ramifications of a Greek default are difficult to fathom especially when it comes to the unintended knock-on effects. But essentially, and also ironically, the very intractability of the problem has given investors time to price in the calculable risks.
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Deutsche Bank