A Wall Street Journal report stated this morning that Germany is no longer resisting giving extra aid to support Greece and decides to drop its earlier suggestions of early rescheduling of Greek bonds.
This will help the European Union reach a deal sooner to draft a second bailout package for Greece and reaching a new loan deal to avoid Greece from defaulting.
The EU and IMF had reached a deadlock recently with the IMF threatening to withhold its next aid tranche to Greece due in June. The IMF jointly with the EU provided Greece with a 110 billion Euro rescue package last May but Greece has still not met its deficit-reduction goals and is in great risk of defaulting on its huge 327 billion Euro debt. This rattled the markets last week causing the Euro to drop against most majors currencies.
However, Germany’s decision to lend to Greece again even without bondholders sharing the burden in the short term gave a sigh of relief to investors just in time before Greece runs out of cash in mid-July.
The optimistic news helped the Euro surge to a new three-week high against the US Dollar in Asian trading today as the perceived risk of an immediate debt restructuring eased.
EURUSD rose from yesterday’s low of 1.4256 to a high of 1.4405 today.