Greece aid agreement reached
By Michael Hewson (Senior Market Analyst at CMC Markets UK)
After several meetings, hours of talks and a number of false starts it appears that Greece has finally got its debt deal and with it around ?34bn of new bailout money, however some elements still remain to be agreed upon, and as such the potential for further wrangling and potholes in the road remains.
It appears that the interest rates on Greek loans, would be reduced or deferred, while some maturities will be extended, which is likely to incur losses for some countries who have borrowed money at much higher rates.
It also appears that the IMF has relaxed its demand for Greece to get its debt to GDP ratio down to 120% of GDP by 2020, in exchange for a commitment to substantially below 110% in 2022.
There will also be a debt buyback, while Eurogroup chief Juncker said that he hoped to get the payment finalised by December 13th, after various EU national parliaments had approved the bailout changes.
It remains to be seen if this particular deal will be any more successful than previous EU deals to help Greece, and the likelihood is that we will probably be back discussing another renegotiation before too long, nevertheless equity markets look set to open higher this morning.
The final revision of UK Q3 GDP is expected to be announced later this morning with expectations varying from a slight downward revision to 0.9% due to disappointing September data, or remaining unchanged at 1%. This figure is not the one that markets are concerned about given the one-off factors that probably boosted the numbers in Q3. The main concern remains about growth in Q4 given the recent run of poor economic data, and last week?s rather downbeat tone from Bank of England governor Mervyn King.
In the US the latest durable goods numbers for October are expected to fall back sharply from the big transportation induced gains of 9.9% in September, with a drop of 0.7% expected. Consumer confidence on the other hand for November is expected to remain buoyant with an increase to 73, from 72.2 expected, probably as a result of President Obama?s re-election.
EURUSD ? the single currency had a fairly quiet day yesterday trading below trend line resistance at 1.3005 from the 2011 1.4940 highs. A break here has the potential to retarget the September highs at 1.3175.
Any pullbacks are likely to find support around the 1.2910 area where the 50 day MA sits, while below that we also have trend line support from the 1.2050 lows which now comes in at 1.2735.
GBPUSD ? a fairly tight range yesterday which managed to stay above the 1.6000 level. Below 1.6000 could see a drop to the 1.5970 area. The potential remains for a move up to 1.6100 channel line resistance from the 1.6310 highs, after hitting the 1.6050 level on Friday. Above 1.6100 has the potential to target 1.6200 and the October highs.
To push conclusively lower we would need to see a move towards and break below 1.5815 trend line support from the 1.5270 lows as well as 1.5660.
EURGBP ? continues to hold above the 200 day MA at 0.8080 with resistance still at 0.8115 there remains the possibility of a move towards the October highs at 0.8165, as the current bullish phase continues.
A move and close below 0.8080 would undermine the potential for further gains and reopen the downside and move back to 0.8020.
On the downside trend line support comes in at 0.7990 from the July lows at 0.7755.
USDJPY ? we continue to slip back after last week?s highs at 82.85 last week. We could see further weakness towards 80.50 in the short term, but the US dollar remains on track for the March highs above 84.00. We also have interim support at 81.80.
The break above the weekly cloud at 80.50 for the first time since April looks like the catalyst for further strong gains.
Only below the 80.50 level suggests a move back towards the November lows at 79.00.
Equity market calls
FTSE100 is expected to open 28 points higher at 5,815
DAX is expected to open 58 points higher at 7,350
CAC40 is expected to open 23 points higher at 3,524