The euro spiked and stocks are rallying on the Greece deal

CHICAGO, IL – DECEMBER 31: Traders and clerks at the CME Group toss confetti to celebrate the final trading session of the year December 31, 2010 in Chicago, Illinois. The U.S. stock indices posted positive returns for 2010 with the S&P, Dow and Nasdaq on pace to close the year up over 10 percent. (Photo by Scott Olson/Getty Images)

Markets, understandably, have reacted positively to the news that a deal on Greece has been reached.

The euro, having traded as low as 1.1090 against the US dollar earlier in the session, spiked as high as 1.1196 although it is now subsequently moving lower, presumably as investors revert to using the common currency as a source to fund carry trades.

European stocks surged on the open with the EuroStoxx 50 jumping 1.44%. Elsewhere the German DAX, CAC 40 in France and FTSE 100 in the UK are higher by 1.13%, 1.51% and 0.76% respectively.

European government bonds, having been firmer for most of the Asian session (yields lower), are now trading lower with the exception of Greek debt. The yield on benchmark 10-year bonds has fallen to 13.66% having been above 15% late last week.

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