EUR USD (1.3250) The Greek Parliament approved the austerity package aimed at averting default on the March 20th bond repayment deadline. The backdrop of continuing street violence and several cabinet-level resignations, of course, is unlikely to instil confidence in the market that the Greek travails are heading for a closure. In any case it is unclear whether the Feb 15th meeting will see the eurozone finance ministers sign off on the €130 billion bailout package or whether they will discover yet another deficiency in the budget significant enough to derail the approval timeline once again. If the eurozone finance ministers are unable to signal that there is some end to the austerity demands, the Greek unions, the major organisers of strikes, are unlikely to be deterred from organising more. Given that the large part of the bailout package is intended to service Greek debt costs and apparently recapitalise the Greek banks, for the politicians and the creditors to sell it as aid to the Greeks is a daunting task. The Greek debt-GDP ratio is hardly moving towards sustainable levels, as the latest Eurostat statistics suggest, largely because the growth side of equation disappoints. In this respect, the trajectory of the crisis is unchanged, despite the dramatic nature of the developments in Greece. This explains why the implied volatility has been hardly influenced and the course of the euro exchange rate has not been upset. Our price target remains intact at 1.3395, as does the risk-limit at 1.3130.
Click here to read the full report: Daily forex 02.13.12
Deutsche Bank