EUR/USD reversed its earlier slide following reports that the Swiss Nation Bank intervened in the currency markets purchasing EUR/CHF, which drove a 1.5% rally in the cross currency pair. The SNB’s sudden abandonment of its former 1.2000 floors, but Thursday’s activity puts a bullish floor under the EUR/USD. This news comes following an announcement Wednesday evening that the ECB revoked a waver on Greek collateral that saw the currency pair tumble to support levels.
The European Central Bank suspended waiver onGreek debt beginning next week on Feb 11. The central bank said in a statement that it cannot assume a successful conclusion of the troika’s program review and that the suspension on the waiver on credit requirements for Greek government issued papers is in line with existing rules. The decision adds further pressure on Greece, as it means that Greek debt can no longer be used as collateral, as it is not investment grade. The ECB added Greek liquidity needs can be met by the Greek central bank through Emergency Liquidity Assistance.
The Greek Finance Ministry in its response to the ECB’s announcement on the decision to end the waiver on Greek government bonds in collateral requirements, highlighted that the ECB also stressed that the Greek banking system remains capitalized through the ELA mechanism.
In economic news, the EU lifted Eurozone 2015 growth forecast to 1.3% from 1.1%. The winter set of forecasts from the European Commission predicts growth of 1.3% this year, followed by 1.9% next year for the Eurozone as a whole. Even Italy is expected to finally emerge from recession in 2015, although France and Italy are predicted to continue to underperform, highlighting the lack of reform in these countries.
The EUR/USD whipsawed plunging to support and then rallying back to the highs seen on Wednesday. Momentum remains positive, as the MACD (moving average convergence divergence) index recently generated a buy signal. A break of resistance at 1.1550 would target resistance near 1.19.
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