Article by AlgosysFx
Optimism that the Euro Zone is making headway in resolving the debt crisis is believed to continue buoying the Euro opposite the US dollar today. Yesterday, EU officials struck an accord to create a single policeman to oversee important banks in the bloc and finally gave their nod to the immediate release of bailout loans to Greece. Meanwhile, vital gauges of the Euro Zone economy on tap for release today are likely to suggest that the region’s economy is steadily recovering from its slump.
European Union finance ministers achieved a landmark deal early yesterday that would bring many of the continent’s banks under a single supervisor, a move governments hope will be a major step toward solving the three-year-old debt crisis. The ministers said the ECB would begin supervising the most important and vulnerable banks in the Euro Zone come March 2014. As soon as it takes over, the ECB will be able to compel banks to increase their capital buffers and even close down unsafe lenders. Analysts say that with the deal in place, the Euro Zone has passed the first step to a banking union which is designed to cut the link between struggling banks and their governments.
In another dose of positive developments, Euro Zone ministers finally agreed to the immediate release of 34.4 Billion Euros of aid to Greece, with another 14.8 Billion Euros following by the end of March. The approval followed a successful bond buyback this week, which has halved the amount of bonds outstanding. The Eurogroup expressed confidence that a continuation of fiscal and structural reforms undertaken by the government will allow the Greek economy to return to a sustainable growth path. The development has managed to significantly cool down talks of a “Grexit” or Greek exit from the Euro. Instead, Prime Minister Antonis Samaras says the country now holds a major chance to exit from the crisis.
Today, market attention will likely be on key updates on the Euro Zone economy in the form of manufacturing and services activity gauges. Continuing the optimism, slight improvements in the figures for December are estimated. The French Flash Manufacturing PMI is set to rise from 44.5 points to 44.9 points to suggest a slower contraction while the French Services PMI is predicted to remain unchanged at 45.8 points. In Germany, its Manufacturing PMI is deemed to rise from 46.8 points to 47.1 points while its services sector is foreseen to have returned to an expansion with its PMI believed to improve from 49.7 points to 50.0 points in December. For the whole currency bloc, the Flash Manufacturing PMI looks set to increased from 46.2 points to 46.6, while the Flash Services PMI is projected to edge up by 0.3 points to 47.0. Amid such positive developments, a long position is advised for the EUR/USD today.
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