EUR USD (1.3225) The scepticism around the Greek bailout deal is pervasive. While it was clear that the package was essentially crafted for servicing the debt costs of the Greek government, the complex PSI deal, it seems, does not guarantee a closure on the issue yet. It is not clear to what extent the IIF, the group which was negotiating on behalf of the Greek bondholders is still truly representative of them. The Financial Times estimates that hedge funds have increased their ownership of Greek bonds and now own around 25-30 percent. It is then not surprising that the CDS prices are rising in anticipation of further dissent, and that the Greek government may now have to pass a legal reform to make the fractious bondholders fall in line. This legal step assumes, of course, that 66 percent of bondholders are in favour of the voluntary deal. With the markets already dissecting the fine print, the certainty-inducing ability of this deal had a shorter half-life than the earlier EU summits. On the Greek budget deficit front, the latest data revealed that it will amount to 6.7 percent of GDP in 2012 and not 5.4 percent as was expected earlier. Greece it seems is moving towards the downside scenarios depicted in the IMF report which was circulated before the bailout negotiations. We still see the euro with a potential to 1.3395 and beyond this to 1.3590. However, due to risk-reward considerations, we must retreat from the idea of a bullish strategy on dips.
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Deutsche Bank