Euro Gains on Greek Deal
Finally! The Greek situation has been put to bed! Or has it?
On Thursday morning, Greek leaders announced that they had finally reached a deal with their private creditors to avoid an outright default. The EUR/USD currency pair instantly rallied on the news, spiking over 0.30% to break strongly above the $1.32 price level.
US equity markets moved into positive territory, trading at modest gains early in the session on Thursday. Equity futures had been trading in negative territory before the announcement on Greece. Chinese inflation data may have dampened hopes for the prospect of a bullish movement in the US market.
The EUR/USD remained in positive territory throughout the morning session.
The European Central Bank also met on Thursday. The Central Bank opted to leave interest rates unchanged. In the press conference following, the ECB's president—Mario Draghi—stated that the ECB did not discuss changing the interest rate.
Draghi also confirmed that he had been made aware of the Greek deal.
Likewise, the Greek Prime Minister also released a short statement confirming the deal. According to the Greek Prime Minister the deal had been "completed this morning with the success of government consultation with the Troika."
Yet, have investors truly seen the end of this Greek saga?
Immediately after the news broke, several Greek unions promised to new strikes, even going so far as to call for a "social uprising."
The two unions were the General confederation of Workers of Greece and the Civil Servants Supreme Administrative Council.
Protests and strikes have been rocking the country for months now, which may have contributed to the continuing decline of the Greek economy. As per the terms of the deal, Greece will let go of thousands of public workers while slashing benefits and pension plans.
This could complicate the deal, as it remains based on assumptions for future Greek economic growth. If the country's economy continues to deteriorate as strikes persist, the ability for Greece to hold up its end of the bargain may be thrown into doubt.
Its also unknown if the Greek government could later renege on the terms of the deal, especially if a new government is elected based on a strong opposition to the imposed austerity.
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