Euro plunged in value to start the week, thanks in large part to the latest banking crisis, located in Cyprus. An unprecedented bank tax caused consternation over the weekend, and renewed fears about banking problems and bailout prospects. However, announced flexibility from eurozone leaders is supporting the euro right now.
In order to keep the bailout on track, eurozone leaders are offering to be flexible in the matter of the bank tax just announced by Cyprus. A vote on the bank tax, which is supposed to ease costs to smaller savers, has been put off again. The vote is needed in order to secure a round of bailout funding.
Concerns about a bank raid in Cyprus are fueling worries that another Greece could be seen — in spite of the relatively small impact Cyprus has on the overall eurozone economy. By allowing some degree of financial disruption, the eurozone policymakers hope to avoid sovereign default. No one wants to see Greece repeated in other countries, and the eurozone leaders seem intent on keeping sovereign defaults from risking the euro.
At 14:38 GMT EUR/USD is up to 1.2961 from the open at 1.2909. EUR/GBP is up to 0.8568 from the open at 0.8539. EUR/JPY is up to 123.1325 from the open at 122.1270.
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