This past Thursday the EU agreed to lend €8.5 billion ($9.5 billion) to Greece, helping the country pull back from the brink of default. Euro zone lenders agreed to dole out the relief in 2 tranches; €7.7 billion in July to cover Greek debt currently maturing and €800 million to cover late debt payments. An additional €800 million would be paid to Greece after the summer. The Euro rallied Friday on the news after having fallen Thursday on some weak trade balance data and the stronger dollar.
The decision was made after Greece completed all reforms requested by creditors to mover forward in the bailout program, but it struck us while watching the price action in the Euro that this particular currency has an extra data set that others do not. Brexit is clearly headline news as the talks between the UK and the EU begin today, but Greece is still out there. A debt crisis for the Eurozone that and stole headline with talk of the destruction of the entire EU, has not come to any sort of conclusion yet. At the same Eurozone finance minister’s meeting this past Thursday, some details on possible debt relief in 2018 were provided as the IMF agreed to join the bailout. The IMF would join, but would not disburse any of its own money to Greece until the Eurozone provides enough details on possible debt relief for Greece in 2018! This would allow the IMF to calculate whether Greek debt can be stabilized. And now we have Brexit beginning.
The Euro is the second largest currency traded in terms of volume but it has by far the largest number of fundamental factors swirling around it. It’s not just the EU economy, the ECB, bank stability in general and it’s relationship to the dollar. It’s also other sovereigns, some that use the euro and some that don’t and their relationship to the EU. Greece has been an issue for 8 years. Looks like some volatile decades lie ahead.