Forex – Fluid Greece talks edge toward stop-gap, China trade data mixed
The euro held weaker in Asia on Monday as Greece and international creditors seemed to edge toward a stop-gap measure though the talks are fluid and details sparse on a particular path forward with the most pressing issue of liquidity to cash-starved banks pending.
The weekend talks, which were supposed to be the final deadline for a deal, on late Sunday were divided on the way forward, according to reports.
Greece may get €7 billion in “bridge” finance before July 20 to enable it to make payments and keep the banking system afloat while parliament passes a long list of tough reforms, EU sources said of the most promising effort so far in last-minute talks on Sunday to secure a deal.
According to an assessment drafted by the Euro group and provided to euro zone leaders in Brussels on Sunday, Greece needs a total of €7 billion before July 20 to cover its financing needs, with €3.5 billion of that amount being owed to the European Central Bank.
Leaders are discussing using a mixture of €1.9 billion still owed to Greece from profits the ECB made as part of its securities markets program as well as a potential cash disbursement from €13 billion still lying dormant inside the European Financial Stabilisation Mechanism, an old bailout fund created in 2010 to provide financial assistance to EU member states.
A qualified majority inside the ECOFIN Council, which means 16 out of 28 countries, would have to vote in favor of it, according to reports.
Elsewhere, China’s trade surplus reached $46.6 billion in June, while imports in U.S. dollar terms fell 6.1%, a better showing that the 15% drop expected year-on-year. Exports gained 2.8%, a good boost above the 0.2% fall seen.
EUR/USD traded at 1.1123, down 0.31%, while USD/JPY changed hands at 122.55, down 0.18%. AUD/USD was quoted at 0.7436, down 0.10%.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.22% to 96.17.
Last week, the euro rallied against the dollar and the yen on Friday amid renewed optimism that Greece would reach a deal on a new bailout with its creditors, allowing the country to remain on in the euro zone.
Hopes for a breakthrough were boosted after Greece put forward new proposals on budget cuts and economic reforms ahead of a meeting of the euro group of finance ministers on Saturday.
The yen had strengthened broadly earlier in the week as the deteriorating situation in Greece and a rout in Chinese equity markets bolstered safe haven inflows.
In the week ahead, developments in Greece look likely to continue to dominate sentiment and monetary policy statements by the European Central Bank and central banks in Japan and Canada will also be in focus.
On Monday, the Euro group of euro zone finance ministers are to hold more talks on Greece’s bailout in Brussels.
The Bank of England is to publish the results of its quarterly survey on credit conditions.