Forex Flash: Euro derives support from bullish Greek buy back sentiment – BTMU
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EUR/CHF
FXstreet.com (Barcelona) - The Euro is continuing to derive support from the narrowing Eurozone sovereign credit risk premium with 10 year yield spreads between Italian and Spanish over German government bonds narrowing towards 3.0% and 3.8% respectively notes Lee Hardman, FX analyst at the Bank of Tokyo Mitsubishi UFJ.
He notes that positive momentum was reinforced yesterday by the market's favourable reaction to the release of the Greek debt buyback plan which involves paying a bigger than expected premium over previous market prices for Greek bonds held by the private sector, increasing the likelihood that participation will be high enough to fully spend the planned EUR 10bln.
Should all EUR 10bln be spent then the Greek Government would buy back debt with a face value of EUR 30bln or around half the outstanding EUR 61.5bln and the deadline is set for Friday. Elsewhere, Hardman notes that the Swiss Franc weakened modestly yesterday with EURCHF drifting higher from around 1.2060 to 1.2090 following the announcement from Credit Suisse that it plans to introduce negative rates on short term deposits held by financial institutions in Swiss Francs.
Hardman finishes by writing, "We believe that it is unlikely to sustainably weaken the Swiss franc whose safe haven appeal will not be materially diminished by the announcement. The Swiss franc is likely to continue to trade as euro proxy in the year ahead as it has done since the SNB's introduction of the EURCHF 1.20 floor."
He notes that positive momentum was reinforced yesterday by the market's favourable reaction to the release of the Greek debt buyback plan which involves paying a bigger than expected premium over previous market prices for Greek bonds held by the private sector, increasing the likelihood that participation will be high enough to fully spend the planned EUR 10bln.
Should all EUR 10bln be spent then the Greek Government would buy back debt with a face value of EUR 30bln or around half the outstanding EUR 61.5bln and the deadline is set for Friday. Elsewhere, Hardman notes that the Swiss Franc weakened modestly yesterday with EURCHF drifting higher from around 1.2060 to 1.2090 following the announcement from Credit Suisse that it plans to introduce negative rates on short term deposits held by financial institutions in Swiss Francs.
Hardman finishes by writing, "We believe that it is unlikely to sustainably weaken the Swiss franc whose safe haven appeal will not be materially diminished by the announcement. The Swiss franc is likely to continue to trade as euro proxy in the year ahead as it has done since the SNB's introduction of the EURCHF 1.20 floor."
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