The euro pulled back from a two-month high reached on Thursday when boosted by news that Greece reached a deal on austerity measures needed for a second bailout and a debt swap deal with its private bond holders. The deal was clinched in time to present to the Eurogroup meeting in Brussels last night, where euro zone finance ministers were to review the austerity plan before approving the disbursement of the 130 billion bailout funds.
But Eurogroup chairman Jean-Claude Juncker set three Conditions before allowing the disbursement. He said that the Greek parliament must first ratify the plan. Second, a further 325 million euros of spending cuts needs to be found, and finally, political assurances must be given that the plan will be implemented.
EURUSD slipped slightly in Asian trading to 1.325 due to some short-term-focused traders’ profit-taking orders. The euro is expected to hold steady and bounce again as overall sentiment is positive since the main hurdle for Greece has been passed and reaching the debt deal means Greece will avert a default that could have had devastating effects to the rest of the euro zone.
USDJPY rose to 77.74, the highest level since January 26. Investors are shifting away from the safe haven yen because of more upbeat market sentiment due to improving U.S. economic indicators, along with progress in Greek debt restructuring.
The Australian dollar was weaker after the Reserve Bank of Australia (RBA) issued its monetary policy statement today and signalled that it has room to cut interest rates if needed. RBA said it sees the economy expanding at a slower pace than initially predicated. Adding to the case for a rate cut in the near term was the rate hike in one of the country’s major banks, ANZ Bank’s mortgage rates. If the RBA then judges that conditions will tighten in the economy too much since borrowers will be burdened more, RBA will respond by cutting the cash rate. AUDUSD slid to 1.0695 from 1.0783.