The back and forth in the European sovereign debt situation continue today, with markets see-sawing from hope to gloom.
Initially, market sentiment was positive as China re-affirmed its commitment to help Europe via the IMF as well as by helping to support bond issuance via the EFSF. For the most part the comments rehashed what we have heard from China before, but the market latched onto it and helped build up risk and the EUR/USD prior to the NY session.
From Bloomberg: China will always adhere to the principle of holding assets of EU sovereign debt, People's Bank of China Governor Zhou Xiaochuan said in Beijing today. We would participate in resolving the euro debt crisis, he said, echoing comments by Premier Wen Jiabao yesterday.
China's willingness to support Europe to cope with sovereign debt problems is sincere and firm, Wen said at a joint press conference yesterday in Beijing with European Union President Herman Van Rompuy. China is ready to get more deeply involved in participating in solving the European debt issue.
From Reuters: Euro zone finance officials are examining ways of delaying parts or even all of a second bailout program for Greece while still avoiding a disorderly default, several EU sources said on Wednesday.
Delays could possibly last until after the country holds elections expected in April, they said.
There are proposals to delay the Greek package or to split it, so that an immediate default is avoided, but not everything is committed to, one official briefed on preparations for a euro zone finance ministers call later in the day told Reuters.
Now, we did have the leading candidate to become the next Prime Minister send a letter to the ECB saying that he would commit to the implementation of austerity measures even after winning, which is a key requirement for disbursement of the second bailout.
From FT: Antonis Samaras, leader of the conservative New Democracy party, had blocked an all-party pledge to stick to a €3.3bn austerity package after the election during crunch talks between the members of the coalition government last week. The idea that he might seek to renegotiate the terms of the bail-out if he won alarmed eurozone leaders.
But on Wednesday, Mr Samaras committed himself to implementing the austerity package in a letter to the heads of the European Central Bank, European Commission and International Monetary Fund - the troika of official creditors negotiating the Greek bail-out - as well as Jean-Claude Juncker, the Luxembourg prime minister who chairs the euro group.
If [New Democracy] wins the next election in Greece, we will remain committed to the programme's objectives, targets and key policies in Greece's original bail-out and the new agreement between Greece's political leaders, he wrote.
Still, it may not be enough.
Several European nations like Germany, the Netherlands, and Finland have become more bold with considerations of kicking Greece out of the Euro-zone, and now believe that Europe and its banking sector could withstand that course of action. That creates uncertainty because a failure by Greece to meet its €14.4 billion bond redemption on March 20 would mean a messy default with big ramifications for financial markets.
From FT: Wolfgang Schäuble, the German finance minister, said on Monday the eurozone was better prepared than two years ago to deal with a default.
A day earlier, Philipp Roesler, the German economy minister, said such an outcome had lost much of its horror. Senior officials from the Netherlands and Luxembourg have made similar statements publicly in recent days.
That means that markets will continue to be driven by headlines for this week and until that March 20th deadline comes, unless Europeans find some way to kick the can down the road by allowing Greece to meet that deadline but not give it the rest of its funds.
The concern is that we continue to In the US positive leading indicator in the form of the Empire manufacturing index which help to give equities a boost were paired up following a weaker than expected industrial production report as well as the latest headlines out of Europe.
Nick Nasad is an analyst, educator, and trader; and one of the main contributors to FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
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