Greece continues to be the main headline in the foreign exchange complex on Monday after European leaders agreed to a €110 billion lending facility for the beleaguered nation over the weekend.
According to Eurogroup President Jean-Claude Juncker delivering the news, €80 billion in loans will come from the euro zone, with the IMF fronting the remaining €30 billion.
The package also includes a €10 billion provision which will go to creating a Greek, bank-stability fund. According to EU Monetary & Economics Commissioner Olli Rehn the interest rate on the Greek lending facility if around 5.0%, and the funds will begin being disseminated on May 19, the next Greek government bond redemption.
The big question here is whether or not the measures will be sufficient to calm the financial markets, and convince traders that Greece will not default on its debt, and that Spain and Portugal will not be dragged down.
While earlier indications suggested that the markets were happy with the news (the euro opened higher at the beginning of the Asia-Pacific session) EUR/USD has since declined as the markets have opened.
One may point out that early reports last week had €120 billion euro allocated to Greece.
Also, German policymakers have suggested the agreement will be a tough sell for the voters, which will vote in regional elections over the coming days.
The bottom line is that if Germany wavers, the single currency will remain weak, or weaken further.
EUR/USD last traded lower by 26 pips at 1.3268 after trading between 1.3262 to 1.3361 so far today. Short term support lies at 1.3225 and then 1.3115 and then 1.2965 from April 28, 2009, while resistance is at 1.3426 followed by 1.3521 and 1.3818.
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