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Is Greece poised to give the euro a boost?

Is Greece about to lending a helping hand to the euro against the pound? It could be, following reports that Greek officials are nearing an agreement with bondholders regarding a debt haircut.

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For almost eight months, bureaucrats in Athens have been negotiating to convince investors to take a voluntary loss on their bonds, arguing this is the only way Greece can get its debt onto a sustainable footing. Until just the last day or so bondholders have refused, for the good reason that volunteering to take a loss is like opening your wallet to strangers in the street!

Somehow or other though EU officials have managed the impossible, and investors stand poised to accept a 50.0% loss on their existing Greek bonds, while accepting an interest rate of just 3.75% on replacements. How then might this help the euro? Because if Greek officials and bondholders had not reached agreement, Greece stood to have defaulted in just eight weeks.

Hence, this is not so much proof that Europe is solving its crisis as simply avoiding hurtling off a cliff. For people involved in trading currencies, it is a little like the worst student in the school exceeding your expectations by getting 2+2 right, increasing your regard for him! Hence the possible euro strength to come.





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Peter Lavelle is an economist at foreign exchange broker Pure FX. For a free no-obligation quote regarding changing currencies, get in touch at foreign exchange specialist Pure FX.
Website: http://www.purefx.co.uk/landing-page-iberosphere/

Copyright: Peter Lavelle, Pure FX
Category: Expats
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1 Comment for “Is Greece poised to give the euro a boost?”

  1. Hey Peter, this is an interesting update.

    It just seems to come from a totally different world, compared to what some “media” say: http://www.elmundo.es/elmundo/2012/01/29/economia/1327850170.html

    People perceive totally different worlds, while living in the same one. (Just apparently, Plato would clarify.)

    Cheers!

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