The euro is surging, gaining nearly 1% against the US dollar to climb back above 1.14 for the first time since the ECB announced a new QE program last month.
Tuesday’s surge in the euro comes after a report from Bloomberg said that officials in Germany are expecting bailout negotiations with Greece to stretch on “for months.”
On Tuesday, Bloomberg reported:
Germany expects negotiations with Greece to drag on until the current round of bailout funding runs out and is prepared to play a waiting game until April or May, when the country approaches a cash crunch, a person familiar with the matter said.
Greece would not immediately go bankrupt at the end of February because it has resources to last beyond that point and Germany is ready to wait until there is a more urgent financing need to strengthen its bargaining position, said the person, who asked not to be identified discussing internal talks.
Chancellor Angela Merkel, who is still assessing Prime Minister Alexis Tsipras’s motives, is taking a tough approach with the new premier and wants to avoid being drawn into a duel with him, another official said. No one from the chancellery has met with him yet.
In recent months, the euro has weakened in the run-up to the ECB’s expected quantitative easing program, launched in response to flagging economic growth and deflation in the currency bloc.
Ahead of the ECB’s January 22 announcement, the euro was trading at around 1.16 to the US dollar, falling to as low as 1.11 following the January 22 announcement.
But since left wing party Syriza won in the Greek parliamentary elections, risks in the eurozone have risen as questions surround the party’s plans with respect to meeting its current bailout obligations with the ECB, EU, and IMF.
And as risks rise in Europe, so does the euro.