- The EU is preparing a loan package for Greece after markets pushes yields to record highs late this week
- Rates on loans will be somewhat lower than present market rates but high enough to avoid charges that Greece is being “subsidized”
- Loan deal could be announced as late as next Friday; earlier if necessary
- Fitch downgrades Greece two notches to BBB-, outlook negative
- Fitch downgrades major Greek banks
- Trichet: Global economy on the bend; road ahead bumpy for Europe
- US wholesale inventories rise 0.6% ; adds to GDP
- Gold breaks and closes above 61.8% retracement of drop from $1225 at $1161
- Oil falls 0.43 to $84.96
- S&P 500 rises 0.7% to 1194; 18-month high
Greece was the primary focus for the market today as rumors swirled early in the day that a bailout could be arranged as early as this weekend. The rumors turned out to be credible with details of the bailout slowly leaking out during the course of the trading day. The recent spike in Greek bond spreads and today’s Fitch downgrade (no doubt privately communicated to Greek officials in advance) helped spark action from the EU-IMF. Greece has still not made the official appeal for aid, but that is seen as a formality while the details are negotiated.
EUR/USD rallied as high as 1.3495 late in the day, coming close to the downtrend in place since early December which lies today at 1.3510.
AUD/USD rallied to fresh 2010 highs today as the dollar fell. We broke above the most recent 0.9330 high and reached the low 0.9340s before stalling protection of option barriers at 0.9350. Traders would not be surprised to hear of fresh selling by the RBA near present levels in the near-term.
Cable edged through its recent highs in the 1.5380 area and traded up to 1.5391 before stalling. EUR/GBP short-covering provided a headwind for the pound today despite dollar weakness.
USD/JPY gave up early gains as EUR/USD’s strong bounce helped prompt longs to trim gains. EUR/JPY performed better, no surprise, as short-covering pushed the cross up to 125.80 late in the day.
A restful weekend to all!–