The Wall Street Journal is reporting that private holders of over EUR100 billion (more than 50%) have pledged to participate in the debt restructure, the deadline for which is later today at 20:00 GMT. Greece had targeted a 90% PSI participation, which looks very unlikely at present, but most bank analysts I’ve read are anticipating a take-up of around 75%, which is more than enough for the Greek government to then force the hand of those refusing to take part. My understanding is that this will amount to a default of sorts, initiating a credit event and triggering CDS payouts.
I don’t think that such an outcome would have a massive impact on the EUR. We have seen a tremendous amount of short-covering over the last few weeks and the market is not as short as it was, especially in pairs like EUR/JPY and EUR/AUD, so any positive news isn’t likely to result in a massive EUR short-covering rally. Any disappointing news will certainly send the EUR lower, but Sovereign support looks very solid so I would not expect a collapse either.
