And the winner is…the U.S. dollar
Dear Traders,
After months of tortuous negotiations between Greece and its creditors, Greece finally capitulated to the creditor’s demands and implement measures even more severe than those rejected by Greek voters in the July 5 referendum on austerity. The deal must now pass the Greek parliament, which will be the next difficult hurdle for Prime Minister Alexis Tsipras. Greece will only receive its third aid package when Tsipra’s Coalition of the radical left will approve the reforms. The deal is controversial among critics and some call the proposal nothing more than asset stripping.
While it remains to be seen if the deal will allow the country to stand on its feet in the long-run and act as a foundation for economic revival, one thing is pretty clear: The uncertainty and trauma incurred over the past months have divided Europe and increased the mistrust amongst the parties. Furthermore, the relationships within the Eurozone have been strained as a result. This is why the pressure on the euro is likely to continue.
Three main reasons why the euro declined after the Greek deal
1. The ECB will have to aggressively continue its Quantitative Easing to stabilize the eurozone’s balance sheet.
2. The Federal Reserve could reinforce the confidence that a rate hike is justified given the fact that Greek risk has been averted.
3. The Eurozone ideal has been worn away given the high level of mistrust.
The British Pound first rose against the U.S. dollar and provided traders a nice gain from our long-entry. Later during the day, the greenback was king and sterling declined below $ 1.55. The U.S. dollar strengthened against all of the major currencies yesterday, making it the biggest winner of the Greek debt deal and the most attractive currency.
Today, there are some interesting data releases which should be important to watch:
8:30 UK Consumer Prices
9:00 EUR German & Eurozone ZEW Survey
12:30 USA Advance Retail Sales
(timezone: GMT)
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