EURUSD not joining the Greek deal party

Why is the euro falling across the board?

Stocks are up and European yields are down as expectations rise that we will finally get a deal this week, yet the euro has lost 190 pips since yesterday's highs.

EURUSD H4 chart

The euro has shown that it will go up on good Greek news but it's doing the opposite now. Adam touched on the bund/fx unwind last night but that doesn't look in play with bund yields down with the rest of Europe.

Sometimes it's hard to put your finger on a real reason and my view is that the euro is getting two steps ahead of itself in thinking that a deal is done. I've no doubt we'll see a decent pop IF we get headlines like; "Greece and Troika agree a full deal", but at the moment the market seems to be looking past the Greek affair to what the lay of the land will be after. Should the Greek can be kicked down the road what are we left with?

  1. ECB QE at €60bn per month
  2. The prospect of the US raising rates

I think the euro is already trading those two now which is why we're lower. The market is thinking Greece is a done deal so is taking the opportunity to exploit euro rallies and rising bond yields so they can once again piggy back on the ECB. The QE trade has been knocked out of kilter by Greece as yields rose on the risk of Greece getting shown the door. If you remember, bond yields were at record lows before the ECB started QE. Countries like Spain and Italy were trading at 1.05% & 1.03%. Those QE bonds got a whole lot cheaper to buy recently and the market is now smelling a bargain once Greece is out of the way

Add in the fact that the dollar bulls are far from out of the game on Fed rate hikes and there's enough in the mix on both fronts

I won't dare say that this is the definitive reason but I know the market is always looking for the next bone and often does so before it's finished chewing the last one. Greece isn't over yet and failure to get a deal done this week will see us go risk off again, and probably in a big way