Week in FX Europe Leaders Ponder Greek Bailout Extension

This week saw a considerable number of politicians and policy makers make statements regarding Greece. German policy makers were probably the toughest giving no quarter and hinting at inflexibility. This was preempting Greek PM Samaras due on German soil to discuss an extension on the bailout agreement. Not on the size of the funds, but on the agreement’s deadline.

Angela Merkel will give Greece the benefit of the doubt and will not make any additional judgments until the troika formed by the ECB, the IMF and the European Commission releases their report on Greece.

Below are some other highlights of the week:


  • EUR: The week started on the QT, but this ended up being a temporary front as risk was beginning to be added to investors’ portfolios after a Der Spiegel article over the weekend that the ECB is seeking to impose a cap on yields for Spain and Italy. The proposal is set to be discussed at the September European leader’s summit.
  • WSJ: Reported that the Spanish government would like to see the ECB commit to massive, open-ended sovereign-debt buying before requesting financial aid via the EFSF/ESM and the ECB. It’s also noted that the Spanish requests seem to stand at odds with the steady rhetoric of German officials.
  • EUR: The risk-on trend continued to be supported by rising expectations of a successful outcome to the EZ policy tour de force planned for September.
  • Euro Leaders Plan Talks to Support Greece | OANDA Forex Blog
  • Daily Telegraph UK: Reported that the alleged ECB plan to buy Spanish and Italian bonds was gaining support amongst German officials. The article in particular refer to supportive comments by German ECB board member Asmussen.
  • ESP: Spain successfully auctioned 12 and 18-month T-bills. Many in the market expected the event to have very limited market resonance, given the short tenor of the offerings and recently well-behaved price action in peripheral sovereign markets. The results show that in sum, Spain managed to sell at the top of the +EUR3.5-4b range.
  • Spanish Banks Running Out of Liquidity Options | OANDA Forex Blog
  • WSJ: Reported that the details of Greece’s +€11.5b austerity plan is emerging as Prime Minister Antonis Samaras moves to demonstrate his government this week.
  • Greece bailout: Athens urged to stick with reforms | OANDA Forex Blog
  • Greece needs more time for cuts, says PM Samaras | OANDA Forex Blog
  • Der Spiegel: Reported that the financing gap Greece faces could be even greater.
  • Merkel and Hollande to Face Greece as United Front | OANDA Forex Blog
  • Merkel Allies Signal Greece Concessions | OANDA Forex Blog
  • Rating Agency: Fitch Inc. stated that the weakest EZ member is likely to face rating downgrades by year-end if there were no progress made on finding a solution to the current Euro crisis. They pointed out that the “expectations remain high that policy makers will find a solution to the debt crisis, but there remains the chance of disappointment.” Regarding Italy, the risks facing that economy are more political than economics and that there is “no need for further austerity measures” in that country. How the crisis evolves in Italy depends on what occurs in Spain.
  • GBP: UK Public sector net borrowing (ex-financial interventions) showed an unexpected +£0.6b deficit for July, a month which is seasonally quite strong.
  • Gr: Greek PM Samaras’ has been trying all week to gain more time to complete the reforms requested by European authorities as a condition for financial aid. The rebuttal theme seems to be that small concessions are feasible provided they are strictly made within the framework of the second aid program.
  • EUR: Euro zone leaders have reiterated that they will not make decisions about Greece until the troika completes its review in September.
  • Zero Bund Yields No Deterrent to Euro | OANDA Forex Blog
  • EUR waiting on Greece Germany Meeting | OANDA Forex Blog
  • Buba a Critic of ECB Bond Program | OANDA Forex Blog
  • EUR: Euro-zone flash PMIs showed mixed results, still support ECB easing. Manufacturing PMIs surprised positively with the euro zone aggregate measure up to 45.3 from 44.0, well above consensus for 44.2. Both Germany and France saw manufacturing sentiment rebound to 45.1 and 46.2 respectively. However, the services sector was weaker, German services PMI dropped to 48.3 from 50.3 while French services sentiment was broadly stable at 50.2. Overall the composite euro zone PMI ticked up to 46.6 from 46.5 suggesting momentum is still very weak.
  • NOK: Norway mainland GDP grew a very robust +1.0%, q/q in the second quarter and very strong when compared with +0.2% in the Euro-zone.



ASIA Week in FX



  • EUR Samaras-Hollande meeting
  • USD Consumer Confidence
  • EUR Harmonised Index of Consumer Prices
  • US USD Fed’s Beige Book
  • EUR Unemployment Change
  • USD Core Personal Consumption Expenditure – Prices Index
  • CAD Gross Domestic Product
  • USD Fed’s Bernanke Speech Jackson Hole Speech


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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza