After it’s meeting early last week, the Eurogroup came up with a rescue fund for Cyprus, approved by the EU/IMF. Part of their requirements for the loan deal is for levies to be slammed on all Cypriot bank accounts. This roiled the markets once again and expectedly became the Eurozone’s main news driver for the week.
Cyprus Parliament promptly voted against the plan, including the modified version which exempted accounts less than €20,000. By Thursday, the Eurogroup declared that it is still open to further negotiations with the Cyprus government but that it must still abide by their earlier demands. The key requirement being that the government must raise €5.8 billion as part of the loan it is requesting.
Just before markets closed for the week, the ECB warned that the desperately needed Emergency Liquidity Assistance (ELA) would be withheld from Cyprus’ banks if there is no deal by Monday. But shortly after, the Parliament voted to pass all the necessary bills needed for the bailout. A crucial Eurogroup meeting is underway and should end in favour of the Euro.
In the US, Ben Bernanke’s press conference after the FOMC meeting was a little hawkish. The Fed Chairman’s statement suggested that asset purchases is still very much in progress and that it is still monitoring it’s economic targets. Specifically, he said only successively better job’s report will determine any reduction in the pace of the ongoing QE program.
Lastly, a bill on government funding passed the Senate and should clear the other hurdle in the House without the usual cross-party confrontations. The bill suspends $85 billion in sequesters for another six months. Deadline for the current funding is 27 March and may have caused a government shutdown without the extension.
On the 4-hour chart, go long from 1.2996 – 1.30 and exit at the 1.3160 area once Cyprus is given a safe landing by its lenders.
