The euro demonstrated a surprise performance during Monday’s trading. The currency sank initially due to the worries about the Greek debt drama, yet the losses were short-lived and for some reason the euro bounced strongly after the initial drop.
As was expected, the start of the week was highly volatile. It is hard to say why the shared eurozone currency rallied as news was not helpful at all. Greece threatened to go to the European Court of Justice to prevent the Grexit, as Greek Finance Minister Yanis Varoufakis said:
We are taking advice and will certainly consider an injunction at the European Court of Justice. The EU treaties make no provision for euro exit and we refuse to accept it. Our membership is not negotiable.
Meanwhile, Standard & Poor’s lowered Greece’s sovereign credit grade to CCC- with negative outlook, citing the following considerations:
-We interpret Greece’s decision to hold a referendum on official creditors’ loan proposals as a further indication that the Tsipras government will prioritize domestic politics over financial and economic stability, commercial debt payments, and eurozone membership.
-In our view, the probability of Greece exiting the eurozone is now about 50%.
-Also, we believe that, absent unanticipated favorable changes in Greece’s circumstances, a commercial default is inevitable within the next six months.
Yet with all the bad events, the euro was heading higher during the first session of the current trading week.
EUR/USD rose from 1.1172 to 1.1211 as of 23:09 GMT today following the earlier drop to the low of 1.0954. EUR/GBP rallied from 0.7093 to 0.7127, bouncing from the day’s low of 0.6986 (the weakest rate since November 2007). EUR/JPY opened sharply lower at 135.07 but soared to 137.43 afterwards.
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