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Foreign Exchange Rates Today: Euro Exchange Rates Take a Hit on Bailout Doubts, Juncker remains upbeat on a deal though

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Category: Pound to Euro

Published on Thursday, 16 February 2012 09:41

Written by Sam Coventry

Euro exchange rates fell sharply after unconfirmed reports that the second rescue deal for Greece might be deferred beyond March 20 – the date when a EUR 14.5 bn Greek bond falls due.

The EUR/USD FX rate finds itself a further 0.45% lower this morning at 1.3007, while EUR/GBP has declined 0.35% to hit 0.8296. (Rates courtesy of IG Index).

Other reports claimed that a small bridging loan was being considered to tide Greece over beyond the mid-March deadline – essentially buying time for a fuller discussion on the merits of a longer-term plan.

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"The headlines were a wake-up call to a market that had grown complacent about the risks around the current negotiations," notes Gareth Berry in a morning foreign exchange note from UBS.

However, Eurogroup Chair Juncker sounded far more upbeat at the end of the Eurozone finance minister’s teleconference.

He said that strong assurances had been received from Greece’s political leaders and implied that full agreement is only a few short steps away.

He specifically mentioned the need for mechanisms to ensure stronger surveillance and to prioritise the repayment of debt owed to creditor nations.

Nevertheless, he said that these outstanding issues would be addressed and declared himself ‘confident’ that the finance ministers will ‘take all the necessary decisions’ when they next meet in person on Monday.

Greek Finance Minister Venizelos added that the bond swap details would be announced on Monday provided final agreement is reached on the terms of a second rescue plan.

FOMC minutes from the January meeting revealed that ‘a few’ FOMC officials still cling to the belief that more asset purchases will be needed this year.

"We note however that mainstream thinking within the FOMC appears to have backed further away from this position, and would only consider additional easing if the US economic outlook darkens. There was no FX reaction to the minutes," says the UBS note.