The Euro is foreseen to maintain its gains alongside the US dollar today as Euro Zone officials and the International Monetary Fund have finally clinched a deal on a new debt target for Greece in a breakthrough toward releasing urgently needed bailout funds for the debt-strapped country. Meanwhile, market sentiment is also seen to be supported by early reports suggesting that Cyber Monday sustained the strong sales seen in the four-day holiday weekend, a positive sign for the US economy.
After nearly 10 hours of talks at their third meeting on the issue in two weeks, Greece’s international creditors agreed to reduce Greek debt by 40 Billion Euros, slashing it to 124 percent of Gross Domestic Product by 2020 through a package of steps. To satisfy IMF concerns that the nation’s debt must fall further to be considered sustainable, finance ministers from the Euro bloc agreed to bring government debt to under 110 percent of GDP in 2022. The deal finally paves the way for Greece to receive loan payments of about 44 Billion Euros to be paid in three installments, still tied to Greece’s implementation of continuing measures. According to officials, the deal will reduce Greek debt through a mix of interest-rate cuts on loans, a buyback of Greek debt at sharply discounted prices, and the European Central Bank returning profits linked to its holdings of Greek bonds to the government.
Greece’s debt currently stands at more than 170 percent of GDP, a level that officials have said would fall to a still elevated 144 percent in 2020 without further measures. Heavily in debt, Greece is predicted to enter its sixth year of recession, and there had been lingering fears that it might be forced to exit the Euro Zone, which in turn destabilizes other member countries. ECB President Mario Draghi believes that such fears are apt to be eliminated with the deal. Hailing the development, Draghi expressed that the agreement “will reduce uncertainty and increase confidence in Europe.” Indeed, the deal will likely clear the way for support for Greece’s ailing banks and allow the government to pay wages and pensions in December. With the breakthrough, demand for the single currency is seen to rise today.
Meanwhile, Americans have seemingly gained newfound confidence to open their wallets as the holiday season gets underway. According to early estimates, sales in Cyber Monday, traditionally the largest e-commerce day in the US in recent years, grew significantly from 2011. IBM’s Digital Analytics Benchmark showed a 24.1 percent jump in online sales compared to Cyber Monday last year. PayPal also said it was seeing 196 percent increase in mobile payment volume this year. Yesterday, the National Retail Federation reported that sales from Thanksgiving through Sunday jumped 12.8 percent compared to last year. On buoyant signs for the US economy, risk appetites are deemed to incline. Hence, a long position is recommended for the EUR/USD today.
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