Euro remained cautiously bid ahead of the critical confidence vote for the socialist government of Greek Prime Minister George Papandreou due at 21:00 GMT later today. Earlier in Asian trade the pair tripped stops at 1.4350 rising to a high of 1.4385 on comments by Mr. Papandreou that he was looking for the broadest possible consensus on the Parliamentary vote.
At this point the market anticipates that Mr. Papandreou will survive tonight’s no confidence measure although he has a majority of just five in the parliament of 300, and one member of his party has already decided to vote against him. Even if the Papandreou government survives and the austerity measures are passed by the Greek Parliament, the credit crisis may face challenges on economic grounds with the German Banking Federation now demanding better incentives before exposed banks are asked to extend repayments on their existing Greek debt.
The situation is further complicated by the rating agencies who may not acquiesce to a rollover of Greek debt. Fitch Ratings warned it would treat a voluntary rollover of Greece's sovereign bonds in any rescue package as a default and would cut the credit rating accordingly. The news briefly sent EUR/USD to 1.4300 in midday Asian trade, but the pair quickly recovered as Fitch quickly turned its focus across the Atlantic warning that US AAA rating may be under threat if the debt ceiling is not raised by August 2nd.
With uncertainty and confusion continuing to reign in the currency market trading may become volatile later in the day and even if the Greek government survives its vote the EUR/USD could sell off on a classic sell the news dynamic. Meanwhile the econ calendar is relatively light with only the ZEW survey on the docket during the European session. For now the pair trades quietly around the 1.4350 level in a state of suspended animation as traders await the latest morsel of news from Athens. @import url(/css/cuteeditor.css);
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