EURUSD found support after the announcement that Greece will receive a €130 billion rescue deal, but it failed to stage a decent rally amid concerns it might need further financing. Indeed, a leaked “strictly confidential” report prepared for eurozone finance ministers revealed that Athens’ rescue programme was way off track and it might need another bailout once a second was agreed.
“While the upwards move in the EUR describes relief that Greece has avoided a messy default next month, the lack of euphoria in the markets on the news aptly reflects the perception that while Greece has overcome one hurdle, the country’s troubles will continue to play out for years,” says Jane Foley, currency strategist at Rabobank.
Still, the market appears convinced that Greece will avoid a messy default when a €14.5billion bond redemption is due next month, even though obstacles to the bailout package remain.
Focus will now switch to private sector involvement in the deal, and if the participation rate is not high enough this could prompt Greece to implement retroactive collective action clauses, which could lead to a credit event.
Athens is also required to implement a series of prior actions by the end of the month before the package can be approved.