The euro tumbled late on Wednesday after the European Central Bank (ECB) released a statement saying that said it would no longer accept Greek government bonds as collateral for lending money to commercial banks.
The toughened stance with Greece makes access to cash more expensive for Greece’s banks. The new Greek government has been making efforts to renegotiate bailout terms with its creditors. The ECB said it could not assume a “successful” deal on Greece’s €240bn (£179bn) bailout and hence it decided to restrict financing to the country’s banks.
Following this announcement, Greek finance minister Yanis Varoufakis issued a statement that said, “This decision does not reflect any negative developments in the country’s financial sector and comes after two days of substantial stabilization.”
EUR/USD fell from 1.1448 to test the key $1.1300 level since the announcement late on Wednesday. From the low, EUR/USD slowly recovered to 1.1363. Two views have emerged regarding the ECB decision. EUR bears suggest the move merely highlights the irreconcilable divide between Greek-EU authorities. EUR bulls suggest the move could provide the catalyst to speed up an agreement.
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