Euro Fails to Reflect The Optimism Of Greece’s New Loan Payout
January 22, 2013 1:01 am in Forex Fundamentals and News
EUR/USD moved in tight ranges since the markets opened yesterday. The currency pair remained over 1.3300 with the low of past 28 hours at 1.3302 and high at 1.3332. A very narrow range considering the recent high volatility in the foreign exchange markets.
Greece’s New Loan Payout
The Euro zone finance ministers approved a payout of €9.2 billion to Greece in during this month.
“The Euro-group notes with satisfaction that the MoU milestones for January, agreed between Greece and the Troika, have been achieved. In particular, an income tax reform has been adopted and end-user electricity prices for low-voltage customers as well as the levy on renewable energy sources have been adjusted. We welcome the commitment of the government to adopt a simplification of the income tax code by spring.”, the statement from Euro group mentioned yesterday.
Out of the approved €9.2 billon, 2 billion euros will be in cash for Greece government’s budget requirements and 7.2 billion will be in bonds to recapitalize the Greek banks.
Installments and timelines
The EU finance ministers had approved a payout of €49.1 billion under the second bailout package during December 2012. Out of this EUR 34.3 billion was paid during the same month. With this month’s payout of EUR 9.2 billion, the balance of last month’s approved sum is 5.6 billion and that will be paid in two installments during the coming February and March.
During November 2012 the Greece government had got 2 extra years until 2016 for spending cuts and balancing the budget which has been a condition for the rescue plans. The December approvals of €49.1 billion payout came with 4 proposed installments over 4 months to keep an eye on the progress of Greece to meet the guidelines for the bailout plans.
Euro remains subdued
As the Euro group meeting continues and there are some expectations of clashes about the efficient channeling of the European Stability Mechanism’s € 500 billion rescue funds directly to the banks, the Euro has been subdued. Since the markets opened yesterday, the currency pair has been running in very narrow ranges against all major currencies.
Since yesterday Euro has been running in a very narrow range against the U.S. Dollar. During past 30 hours EUR/USD has seen a volatility of only 30 pips. EUR/JPY has seen slightly more volatility since the markets opened yesterday. The pair tried to break over 120.00 psychological level again but failed at 120.24. The subsequent fall to 118.88 was rather sharp but since then the currency pair has entered a sideways mode and the price action has been staying below 119.68 and over 119.00. Euro had shown some continuing strength against the British pound yesterday when EUR/GBP went as high as 0.8421 but lost steam ahead of the psychological level of 0.8500. EUR/CHF, which had seen some unexpected upward gains to the high of 1.2569 had dropped to 1.2388 but has been staying in a tight range between 1.2453 and 1.2392.