The euro gave up some gains in European trading as the euphoria from the news of the Greek bailout deal began to fade. The single currency gained over 1 percent early Tuesday after the Eurogroup said it had approved a 130 billion euro bailout that would avert Greece from defaulting on bond-redemption payments due on March 20.
EURUSD rose to a 12-day high of 1.3292 in the immediate knee-jerk reaction to the news but faded by the time the European trading session got underway, with euro easing down to 1.3197. Investors were concerned about how Greece would implement the harsh austerity measures that they have been pressured to agree upon in order to be approved for additional aid from its European partners and the International Monetary Fund. EURJPY fell off a three-month high of 105.99 to 105.10.
Although the second bailout approval does remove short-term uncertainty, implementation may prove to be far more difficult and there will be new stumbling blocks ahead, one being the prospect of elections in Greece in April. Scepticism for now will prevent the euro breaking past key resistance levels at $1.33 and may be range bound until the focus turns to the European Central Bank’s LTRO (long-term refinancing operation) next week. The central bank is expected to inject more cheap funds into the system. This raises concerns on the longer-term risks to the euro, so some selling pressure is expected ahead of the ECB move.
GBPUSD fell off a London session high of 1.5864 to 1.5771. Analysts played down some good UK economic data showing UK public sector finance data for January having the biggest monthly surplus in four years and was far better than forecast. Sterling has been driven by non-domestic fundamentals and mainly affected by news from Greece recently.
The initial risk-on sentiment from the Greek bailout news failed to sustain risk sensitive currencies like the Australian and Canadian dollars which soon gave up gains. AUDUSD fell to 1.0653 from 1.0745 and USDCAD rose to 0.9974 from 0.9927.
USDJPY eased down to 79.61 from the European session high of 79.84 on profit taking.