A team of French technocrats is in Athens, helping the government bring about a plan that has a better chances of being accepted. This is creating optimism in Athens to reach a deal by Sunday. After sending a general letter requesting a 3 year ESM program, Greece has to submit a detailed program today, that will be discussed in the next days.
On the other hand, worried comments by ECB members about the severity of the Greek situation and a report that Merkel is ready to let go of Greece weigh on the euro. For now, we see EUR/USD coming off the highs.
Optimism
The Guardian reports that the French technocrats are working with Greece’s new finance minister Euclid Tsakalatos to “draft the new proposal in an effort to ensure it is as convincing as can possibly beâ€.
Given the deterioration, the austerity measures could be harsh, but debt restructuring could also be on the table. The IMF and the Americans insist on this. The managing director of the IMF, Christine Lagarde, repeated what was said in the IMF’s report: Greece must have debt restructuring.
Pessimism
Draghi says that the situation in Greece is quite severe and did not express optimism about reaching a deal.
Weidmann, the head of the Bundesbank, says that the central banks don’t have a mandate to safeguard banks, hinting about cutting ELA.
There is also a report that if Merkel doesn’t get a favorable proposal from Athens, she is ready to let Greece go.
EUR/USD
EUR/USD had already reached a high of 1.1123 and is now back down to 1.1035. The pair managed to climb gradually through the stairs but is falling down the elevator.
More: Why The EUR Isn’t Weakening? ‘Widow-Maker’ Is Back? – BofA Merrill
Here is how it looks on the chart:
