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The Greek Bailout, Another Bank Bailout?

Well, it finally happened as the EU agreed to bailout out Greece.  Well not really bail them out as much as lend them 30 billion Euros this year. Well not really 30 billion, up to 30 billion. And even that is up to debate.  Greece may only get the loan if they try and fail at borrowing from investors.  Also, at 5% terms, Greece can go to the IMF and get under 3%, albeit at a smaller loan value of around 10 billion Euros. 

My take on all this is that the real winners are all those European banks holding Greek debt that is expiring soon.  First, the market prices of their holdings just went higher.  Second, with default worries now gone, they can wait patiently for the next few years and get paid in full when their bonds come due, thereby getting rid of another albatross on their balance sheets.

So hey, it seems like the EU just pulled off another bank bailout.

Going Forward

So where do we go from here.  I have been pretty negative on the Euro over the past month, so I am admittedly biased that it will go lower.  However, that being said, I mentioned last week, that morning weakness in the Euro and Pound was being wiped out by positive moves from US equities as they kept rallying, and ignored worries from Europe.  The question today is whether positive Europe news will lead to a follow through rally from US equities or not.  So far, European indexes are more or less unchanged, so expectations for the US are limited right now.   As such, I am watching the US openings for indication of where the Euro will go.  If stocks take the news and run higher, than we could see the EURUSD return to its earlier highs of around 1.3700

Articlae orignally published on Forex Review