Tuesday, February 21, 2012

What Analysts Think of the Greek Deal

Wall Street Journal
February 21, 2012

As euro-zone finance ministers reached an ambitious €130 billion rescue deal for Greece after a marathon 12-hour discussion which ended early Tuesday, many bank analysts are cautious about the outlook for the beleaguered country and that of the region’s currency, the euro.

Here’s a round up of what they think, roughly ordered from the most positive views to the most pessimistic:

HSBC: The end of the process has been reached and it blows away all those conspiracy theories about a Greek default and/or a euro-zone break up. While the news isn’t necessarily a reason to buy the euro, it certainly isn’t a reason to sell it either. It will be interesting to see the U.S. reaction later. A key level to break today would be $1.3320. What the euro bears will be worrying about now is implementation risk, but overall this is a win for the bulls.

BARCLAYS CAPITAL: So many hurdles remain. The focus will now be on the implementation of the private-sector involvement and the participation rate which, if not enough, could lead to a credit event. The details of the deal will be resolved over the next few weeks and an orderly Greek default cannot be completely ruled out. Watch euro-area yields for signs of whether investors think the problems are contained in Greece, and expect the 100-day moving average of $1.3310 to hold for the euro for now.


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