EU Leaders Agree to Franco German Rescue Plan
European leaders have agreed to allow the participation of the International Monetary Fund to aid debt stricken Greece. Leaders of the sixteen nation euro zone approved a French/German rescue plan for Greece which includes a combination of bilateral and IMF loans to Greece. European Central Bank president Jean Claude Trichet remains opposed to IMF participation and believes that seeking aid outside the EU could damage the credibility of the euro zone and its currency. Trichet stated, “If the IMF or any other authority exercises any responsibility instead of the eurogroup, instead of the governments, this would clearly be very, very bad.” Trichet’s comments could put the ECB on a collision course with EU leaders as they struggle to prevent Greece’s crisis from spreading. After Trichet’s comments the euro pared earlier gains and returned to a ten month low against the US dollar trading at $1.3277 after hitting a high of $1.3387. About Trichet’s comments currency expert Camilla Sutton of Bank of Nova Scotia stated, “Trichet’s comments highlight the ongoing uncertainty in the EU and it’s the uncertainty that’s impacting the market. The implication is that an IMF aid package would be negative for the currency.” Under the French German agreement the EU will provide half of the loans and the Washington based IMF would provide the rest.
Investors Skeptical
Investors remain skeptical and euro negative. John Curran of CanadianForex Ltd stated, The market doesn’t care that “France and Germany are saying they have the framework to a plan to support Greece including the IMF. It’s like ‘Yeah, OK, great, I have a plan for winning the lottery, too.’ Show us something that works.” An unnamed EU official said late today that EU member nations have agreed on the Franco German rescue plan. Investment giant Goldman Sachs pared bets that the euro appreciate vs. the greenback after the trade lost 2.8%. Thomas Stolper, a Goldman Sachs analyst stated, “We have clearly underestimated the impact on the euro from the European sovereign crisis and perhaps also from the broader macroadjustment that it portends. These political headwinds currently matter far more for the euro than the cyclical factors.”
US Jobs Report Pushes Dollar Higher vs. Yen
In other currency news the dollar strengthened vs. the yen after a report showed that first time applications for unemployment benefits fell by 14,000 to 442,000 during the week that ended March 20th. According to several economists the US added 187,000 jobs this month and a new Labor Department report is due on April 2nd.
