Forex - EUR/USD plunges on Greek swap payout potential

Investing.com - The euro plunged against the U.S. dollar as fears of Greek credit default swap payouts re-emerged and euro zone producer price inflation climbed more than expected.

EUR/USD  hit a high of 1.3333 and a low of 1.3213 where it trades at the time of this writing, down 0.73%

The pair was likely to find support at 1.3056, the low of February 14 and technical resistance exists at 13333, the session high.

Spurring the single currency selling,  the International Swaps and Derivatives Association is considering triggering credit default swap payouts due to collective action clauses.

Despite ruling the European Central Bank’s exchange for Greek bonds for new securities, exempt from private investor losses, did not trigger the CDS payouts on Thursday.

Policy makers including former ECB President Jean Claude Trichet have spoken out against paying the swap contracts due to worries that traders would be encouraged to bet against failing nations thus worsen the euro zone crisis.

In economic news, euro zone producer price inflation climbed more than expected to a seasonally adjusted 0.7% last month from -0.2% the preceding month.

Analysts had forecast euro zone PPI to only rise to 0.5% last month.

Meanwhile, at the European Leaders summit in Brussels, euro zone heads declared a turning point in the debt crisis.

The leaders agreed that given the Greek aid package being started and a potential euro zone recession, its time to focus on a pro growth agenda despite the deficit control treaty signed today.

EU President Herman Van Rompuy stated, “Targets on deficits are intermediate targets, no aim in itself. The restoration of confidence in the future of the euro zone  will lead to economic growth. That is our ultimate objective.”

German Chancellor, Angela Merkel, changed her stance on slowing down payment for the EUR500 billion permanent rescue fund to speeding up the payments at the summit.

Known as the European Financial Stability Facility, the permanent fund will go into operation in July.

The euro was lower against the pound and the yen  with EUR/GBP dropping 0.07% to hit 0.8336 and EUR/JPY giving back 0.17% to hit 107.79.