EUR/USD Breached 1.3 After Greek Agreement

The euro was lifted mildly as eurozone finance minister finally reached an agreement on Greece's fiscal consolidation and agreed that the disbursement of the next tranche of bailout fund would be done on December 13. EUR/USD breached 1.3 psychological briefly but there isn't enough follow through buying yet.

Other European majors also followed and was mildly firmer against dollar. Nonetheless, yen is relatively steady in cross. Also, the Greek deal gave a mild boost to Asian equities and risk appetite lifted AUD/USD through near-term resistance of 1.0480.

The agreement reach by EU finance ministers includes 1) a plan for Greece to lower its debt to 124% if GDP by 2020 and below 110% by 2022. This was in contrast with the IMF's request of 120% by 2020; 2) a reduction of interest rates by -100 bps on Greek debts; and 3) an extension of the maturities of loans for 15 years from other countries and the eurozone's bailout fund, the European Financial Stability Facility, and a deferral of interest payments by Greece on EFSF loans by 10 years.

The decision was welcomed by the eurozone's officials. ECB President Mario Draghi believed that "it will certainly reduce the uncertainty and strengthen confidence in Europe and in Greece." Luxembourg's Prime Minister Jean-Claude Juncker stated that they "strongly believe in the Greek capacity to recover. The Greek people are courageous people. They are willing to bring their country back on the path of growth."

It was surprising that Mark Carney will succeed Mervyn King as BoE's Governor from July 2013. It is difficult to predict the outlook of monetary policy in the BoE under Carney. Paul Tucker was originally tipped as the leading candidate for the post. But it's reported that the Libor scandal undermined his bid and eventually caused him this top post. Yet, Carney has been regarded as an innovative "policy pragmatist."

For instance, Carney, as the head of the BoC introduced the conditional rate commitment in 2009. It was the first G7 central bank to have made such an arrangement. It would be reasonable to forecast that the BoE would be more aggressive in QE implementation under Carney, although he has one vote, after all.

On the data front, New Zealand trade deficit came in wider than expected at NZD 718m in October. RBNZ inflation expectations was at 2.3% qoq in Q3. Japan corporate services prices index dropped -0.7% yoy in October. German import price, Swiss UBS consumer indicator and UK Q3 GDP revision will be released in European session. From US, durable goods orders, house price indices, consumer confidence will be featured. Fed will also release the Beige book economic report.