Italy's Euro Party Not Universal as Ferrari, Campari Rejoice

As some of Italy’s best-known brands from Ferrari to Campari toast the weaker euro, many in the currency region’s third-biggest economy have little to celebrate so far.

The euro’s drop below $ 1.10 is favoring companies focused on markets outside the 19-nation bloc. But with more than 40 percent of the nation’s exports going to other euro countries, the benefit is eluding many in the recession-hit economy.

“The weaker euro doesn’t mean much for us,” said Tiziano Paciti, a partner at marble-work manufacturer Marmi Regina Srl, based near Verona in the north of the country. “Our main clients are in France and Germany, and our suppliers outside the region have always paid in euros and I see no reason why they should change now.”

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With the European Central Bank pumping in stimulus to help the euro area, President Mario Draghi has touted the resulting weaker currency as a boost for the region’s economy. In Italy, the government has cited the currency’s plunge among the top favorable conditions that will help the country emerge from a record-long recession that began more than three years ago.

The euro has plunged about 11 percent against the dollar this year and is the worst performer among a basket of peers measured by Bloomberg Correlation-Weighted Indexes. It was trading at $ 1.08 Wednesday after falling below $ 1.05 last month.

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Jeep Renegade

While Paciti’s remarks reflect the view of thousands of small firms in Italy, the country’s most famous business leaders see things differently. Fiat Chrysler Automobiles NV Chief Executive Officer Sergio Marchionne said last month that the cheaper euro will help sales of Jeep Renegade, the first Jeep model exclusively built outside North America.

For Ferrari, controlled by Fiat, the weaker exchange rate also means a profit-margin boost on U.S. sales. Its high-end sports cars are all built at its plant in Maranello near Modena.

“This is a favorable time for Italy,” said Brunello Cucinelli, chief executive officer of his namesake company, known for its linen and silk sweaters. “The weaker euro will support our exports,” he said on March 10, commenting on both the company and the country’s economy.

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Among those celebrating the latest currency-market developments was Milan-based drinks maker Davide Campari-Milano S.p.A. Starting in the fourth quarter of 2014, what it said was a “very unfavorable” currency impact last year was partially unwound, according to its full-year results.

Most of the luxury-goods companies whose exports benefit from the lower euro “manufacture at home, costs are kept low,” Bloomberg Intelligence analyst Deborah Aitken said in a March 24 report. “With strong gross profits, export prices do not have to be raised, making them more competitive.”

No Control

Italian exports to countries outside euro region totaled 238 billion euros in 2014, up 1.5 percent from the previous year.

Data for 2015 have so far been mixed. Sales of goods and services outside the bloc declined 2.4 percent in January from a year earlier, Istat said last month. While comparable data for February won’t be available until April 16, preliminary figures show that exports outside the entire European Union rose an annual 7.1 percent that month. The statistics office will publish February industrial production data on April 13.

“I really don’t understand why the euro exchange rate should be a good news,” Giuseppe Zanotti, founder and owner of shoemaker Giuseppe Zanotti Design, said in a March 17 interview.

“It’s something that we can’t control anyway,” said Zanotti, whose customers include Madonna and Beyonce. “A weaker or stronger euro won’t change the things. A stronger or weaker idea will do that.”

Short Lived

Ultimately, even those benefiting from the weaker euro may find the boon is short-lived, with analysts and economists at Italy’s largest bank forecasting a reversal for the currency.

“The euro may have bottomed out,” Vasileios Gkionakis, UniCredit’s London-based head of global foreign-exchange strategy, said in a note on March 25. UniCredit estimates a long-term euro-dollar fair value at about $ 1.20 and says it’s hard to justify an even short-term fair value below $ 1.15.

For Alberto Bagnai, who teaches economics at Gabriele d’Annunzio University in Pescara, the currency fluctuations don’t change the ease or difficulties related to Italy’s main export destination.

In a study published in August, he estimated the impact of the currency’s depreciation “to be almost zero or negative in the first three to four years.”

“A depreciation of the euro leaves unaffected the price competitiveness of Italian goods in Italy’s largest market, the euro region,” said Bagnai, author of two books advocating the dismantling of the monetary union. “The increase in exports towards U.S., Japan, and the emerging countries will be offset by an increase in imports from the euro zone.”

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Services sector boasts further growth

Ireland’s services sector expanded during March, as companies operating in the sector continue to benefit from a recovering economy. However, the sharp fall in the value of the euro during the month contributed to a significant rise in input costs.

According to the latest Services Purchasing Managers’ Index from Investec, March saw further growth in new orders, as the headline PMI reading of 60.9 demonstrates “clear and consistent strong growth”, bringing the current sequence of expansion to 32 consecutive months.

Philip O’Sullivan, chief economist, Investec Ireland, said that the latest survey reveals further expansion of activity in March.

“While the rate of growth implied by the headline PMI moderated for a third successive month to 60.9 (from 61.4 in February), it is consistent with a sharp rate of expansion, with the sequence of above-50 readings now extending to 32 successive months,” he said.

Irish services companies benefited from healthy demand from both domestic and overseas customers, according to Investec, with the New Orders index still well above the series average.

Employment across the services sector continues to be broad-based, Mr O’Sullivan said, with data for the four segments of the services industry – TMT, business services, financial services and travel & leisure -reporting simultaneous growth in headcounts for a sixteenth successive month.

However, the survey also revealed that the impact of the European Central Bank’s quantitative easing programme, aimed at stimulating growth in the euro zone, is somewhat of a double-edged sword. The fall in the value of the euro against Ireland’s largest trading partner, the UK, contributed to a sharp rise in input costs in March, but new orders also grew at a substantial pace with new business from abroad, in particular from the UK.

Looking ahead, Mr O’Sullivan noted that, despite recent slippage, the expectations index remains well above the series average, signalling that services firms remain upbeat on their prospects.

“A tangible sign of this is the ongoing rise in payrolls in the sector. Given these factors, we are confident that further encouraging Services PMI readings will be posted in the coming months.”

Meanwhile, euro zone business activity accelerated in March at its fastest pace for nearly a year as customers took advantage of ongoing price discounting to place new orders at a rate not seen since mid-2011, a survey found.

The upbeat survey will provide welcome news for the European Central Bank just weeks after it embarked on a trillion- euro asset-purchase programme to try and spur growth and inflation.

Markit’s final March Composite PMI, seen as a good indicator of growth, stood at 54.0, a touch below the preliminary estimate of 54.1 but well ahead of February’s 53.3. A reading above 50 implies growth.

“The PMIs are indicating somewhat sluggish GDP growth of 0.3 per cent for the first quarter. However, the important message from the survey data is that the pace of expansion looks set to gather pace in coming months,” said Chris Williamson, Markit’s chief economist.

A sub-index measuring new orders leapt to 54.1 from 52.5, its highest since May 2011. That suggests a healthier outlook although the survey also showed companies have now been cutting prices for three years, although not as sharply in March.

Euro zone business growth up as new orders pour in

Euro zone business activity accelerated in March at its fastest pace for nearly a year as customers took advantage of ongoing price discounting to place new orders at a rate not seen since mid-2011.

The upbeat survey will provide welcome news for the European Central Bank just weeks after it embarked on a trillion-euro asset-purchase programme to try and spur growth and inflation.

Markit’s final March Composite Purchasing Managers’ Index, seen as a good indicator of growth, stood at 54.0, a touch below the preliminary estimate of 54.1 but well ahead of February’s 53.3.

A reading above 50 implies growth.

“The PMIs are indicating somewhat sluggish GDP growth of 0.3% for the first quarter.

However, the important message from the survey data is that the pace of expansion looks set to gather pace in coming months,” said Chris Williamson, Markit’s chief economist.

Markit’s growth projection is slightly less than the 0.4% predicted in a Reuters poll taken last month.

A sub-index measuring new orders leapt to 54.1 from 52.5, its highest since May 2011.

That suggests a healthier outlook although the survey also showed companies have now been cutting prices for three years, although not as sharply in March.

Euro zone consumer prices fell again in March, as expected, but the decline was the smallest this year.

That price-cutting helped drive service industry activity up at its fastest pace in eight months. The March service sector PMI rose to 54.2 from 53.7, just below the flash 54.3 estimate.

With the recovery gathering steam and confidence growing because of the ECB’s QE programme, service companies were at their most optimistic since May 2011.

The business expectations sub-index came in at 64.8 compared with February’s 64.1.

“With the ECB’s policy of quantitative easing also set to provide a boost to the nascent recovery in coming months, the economic outlook is therefore brightening as we expect to see more upward revisions to growth forecasts for the year,” Williamson said.

Euro zone business growth accelerates as new orders pour in

By Jonathan Cable

LONDON, (Reuters) – Euro zone business activity accelerated in March at its fastest pace for nearly a year as customers took advantage of ongoing price discounting to place new orders at a rate not seen since mid-2011, a survey found.

The upbeat survey will provide welcome news for the European Central Bank just weeks after it embarked on a trillion-euro asset-purchase programme to try and spur growth and inflation.

Markit’s final March Composite Purchasing Managers’ Index (PMI), seen as a good indicator of growth, stood at 54.0, a touch below the preliminary estimate of 54.1 but well ahead of February’s 53.3. A reading above 50 implies growth.

“The PMIs are indicating somewhat sluggish GDP growth of 0.3 percent for the first quarter. However, the important message from the survey data is that the pace of expansion looks set to gather pace in coming months,” said Chris Williamson, Markit’s chief economist.

Markit’s growth projection is slightly less than the 0.4 percent predicted in a Reuters poll taken last month.

A sub-index measuring new orders leapt to 54.1 from 52.5, its highest since May 2011. That suggests a healthier outlook although the survey also showed companies have now been cutting prices for three years, although not as sharply in March.

Euro zone consumer prices fell again in March, as expected, but the decline was the smallest this year.

That price-cutting helped drive service industry activity up at its fastest pace in eight months. The March service sector PMI rose to 54.2 from 53.7, just below the flash 54.3 estimate.

With the recovery gathering steam and confidence growing because of the ECB’s QE programme, service companies were at their most optimistic since May 2011. The business expectations sub-index came in at 64.8 compared with February’s 64.1.

“With the ECB’s policy of quantitative easing also set to provide a boost to the nascent recovery in coming months, the economic outlook is therefore brightening as we expect to see more upward revisions to growth forecasts for the year,” Williamson said.

Euro Rises Fourth Day as Greek Officials Promise IMF Payment

The euro advanced for a fourth day after Greece pledged to make a payment to the International Monetary Fund this week.

The shared currency climbed versus most of its major counterparts after Greece’s Finance Minister Yanis Varoufakis reiterated that the country will make the payment of about 450 million euros ($ 494 million) due April 9. The dollar slumped as Federal Reserve Bank of New York President William C. Dudley said the pace of interest-rate increases is likely to be “shallow” once the central bank starts tightening.

“We’ve had Greek headlines for three months now and I think it’s contributed to intraday volatility,” Vassili Serebriakov, a New York-based foreign-exchange strategist at BNP Paribas SA, said in a phone interview. “The most interesting question for me this session is whether the euro can hold above $ 1.10. This is a level where we’ve failed repeatedly and, in our view, it suggests an underlying demand from European investors to sell the euro.”

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The euro advanced 0.5 percent to $ 1.1025 at 9:20 a.m. in New York, extending its longest streak of gains in 11 months.

The common currency rose 0.5 percent to 131.156 yen. The yen was little changed at 118.96 per dollar, while the Bloomberg Dollar Spot Index dropped 0.3 percent to 1,179.24.

Global Talks

Greece and euro-area authorities are in negotiations about a package of measures proposed by the government to repair its economy, a condition for the release of bailout funds.

Varoufakis met IMF Managing Director Christine Lagarde in Washington and is scheduled to meet U.S. officials on Monday. “The country will pay the IMF on April 9,” Greece’s Alternate Finance Minister Dimitris Mardas said in an interview on Mega TV on April 4.

“The market’s pretty much siding with the view that Greece will make that payment,” said Prashant Newnaha, a rates strategist at TD Securities Inc. in Singapore. “If they do make that payment, that’s also going to be a positive for the euro.”

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The euro has tumbled 5.5 percent this year, the worse performer among a basket of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar has gained 4.9 percent and the yen advanced 5.7 percent in the period, the indexes show.

Net bearish positions on the euro rose to 226,560 contracts in the week to March 31, the most since the currency’s inception, according to data from the Washington-based Commodity Futures Trading Commission.

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The common currency has slumped amid unprecedented easing from the European Central Bank as the U.S. moves toward raising borrowing costs for the first time since 2006.

The timing of interest-rate increases is still uncertain and will depend on data, New York Fed President Dudley said in a speech Monday in Newark, New Jersey. Jobs data trailed forecasts on April 3, casting doubt on the strength of the U.S. recovery.

“It will be important to monitor developments to determine whether the softness in the March labor market report evident on Friday foreshadows a more substantial slowing in the labor market than I currently anticipate,” he said.

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Currencies: Dollar extends drop vs. euro after payrolls-inspired selloff

The euro edged higher versus the dollar Monday, extending gains scored Friday after weaker-than-expected nonfarm payrolls data saw investors push back expectations for a rate hike by the Federal Reserve.

The euro EURUSD, +0.55%  traded at $ 1.0991, up from $ 1.0972 in North American trade late Friday. The U.S. currency USDJPY, -0.04%  was up versus the Japanese yen at ¥119.07 compared with ¥118.93 late Friday in New York.

The ICE dollar index DXY, -0.16% a measure of the U.S. currency against a basket of six major rivals, was up 0.1% at 96.651.

Trading activity in Asia and Europe was subdued, with many traders still away from their desks for the Easter vacation and other public holidays. The dollar found downside support against the yen to stabilize above ¥119 following Friday’s losses.

Japanese importers and institutional investors were among the investors eager to buy the greenback on dips. Market participants also noted some indirect support for the dollar against the yen via selling of the Japanese currency against the euro.

Friday’s tumble in the dollar was the biggest fall in almost two weeks following U.S. labor data for March that showed nonfarm payrolls grew by 126,000, about half the increase forecast by economists in a Wall Street Journal survey.

Read: Poor jobs report blurs economic outlook

“There is speculation that the consensus about a U.S. rate increase is now being pushed back to December from September,” a change in views that could lower the dollar in currency trade, said Mizuho Securities FX strategist Kenji Yoshii.

Disappointing March jobs report: Will the Fed move?

The March jobs picture and how it relates to the broader U.S. economy.

Even so, Yoshii said he didn’t “get the impression that the USD is falling very much.” He added that larger falls in the dollar are likely being prevented by a cycle in which a weaker dollar causes U.S. stocks to rise, suggesting greater buoyancy in risk-taking sentiment that results in selling away from the perceived safety of the yen and a stronger dollar.

Read: Don’t fight the Fed; invest with it

IG Securities market analyst Juniichi Ishikawa said in a note that the dollar could fall below ¥118 if U.S. stocks soften this week. Mr. Ishikawa said the reaction of U.S. shares to Friday’s downbeat labor data could push the dollar down against the yen later Monday if the shares fall. U.S. indicators, including today’s ISM non-manufacturing business index, and U.S. corporate earnings will also be under the spotlight this week.

“We are going to have a week of closely monitoring the after effects of the lackluster U.S. data and the impact of (U.S.) quarterly earnings,” he said.

The WSJ Dollar Index BUXX, -0.35% a measure of the dollar against a basket of major currencies, was donw 0.1% at 86.54.

Euro down on Greece uncertainty, rate outlook drives dollar up

imageLONDON: The euro fell on Monday, hurt by uncertainty over whether Greece and its creditors will be able to strike a deal that will help Athens secure funding before it runs out of money by April 20.

Talks continued through the weekend and Athens sounded upbeat, but its lenders said compiling a list of reforms could take several more days. Fitch cut Greece’s credit rating to ‘CCC’ from ‘B’ on Friday.

The dollar rose after Federal Reserve chair Janet Yellen underscored the view that the Fed is likely to start raising interest rates gradually later this year.

The dollar rose 0.5 percent to 119.78 yen, while the euro fell 0.6 percent to $ 1.0830 as it pulls away from a 12-year trough of $ 1.0457.

“Even though euro short positions are at record highs, given the Greek uncertainty and the bias for more monetary injection by the European Central Bank, the path for least resistance is a lower euro/dollar,” said Jeremy Stretch, head of currency strategy at CIBC World Markets.

“Unless the euro drops below $ 1.0770 we could see ranged trading, but with the Fed still looking to raise rates, we could see conditions later this week that are more helpful for overall dollar strength.”

The euro got little help from data that showed consumer prices in Germany picking up. Prices are set to rise in March after falling in the first two months of this year, but inflation is still likely to remain low.

“It is a lot more complicated than just looking at Germany. Yes, we need to see higher inflation in Germany, which would help a price adjustment, but at best better German data is just going to halt the euro decline rather than reverse it,” said Simon Smith, chief economist at FxPro.

For the dollar, U.S. jobs data on Friday will be the key event this week. A robust report could see investors position for tighter monetary policy sooner rather than later.

In a speech on Friday, Yellen outlined the case for a ‘gradualist approach’ to rate hikes, mirroring comments after the FOMC meeting on March 18. She signalled the Fed is likely to start raising rates later this year but said policy tightening could “speed up, slow down, pause, or even reverse course” depending on developments in the economy.

“The jobs numbers are going to be important, but I don’t think they will be the deciding factor determining when the Fed does eventually put rates up,” Smith said.

Copyright Reuters, 2015

Euro zone unemployment rate falls 11.3% in February from 11.4%

Investing.com –

Investing.com – The euro zone’s unemployment rate fell to the lowest level since June 2012 in February, boosting optimism over the health of the region’s economy, official data showed on Tuesday.

In a report, Eurostat said that the euro zone’s unemployment rate fell to a seasonally adjusted 11.3% last month from 11.4% in January, whose figure was upwardly revised from a previously reported reading of 11.3%. Analysts had expected the jobless rate to fall to 11.2% in February.

The data showed that among the member states, the lowest unemployment rates were recorded in Germany (4.8%) and Austria (5.3%), and the highest in Greece (26.0% in December 2014) and Spain (23.2%).

EUR/USD was trading at 1.0721 from around 1.0723 ahead of the release of the data, while EUR/GBP was at 0.7265 from 0.7263 earlier.

Meanwhile, European stock markets remained mixed in subdued trade. The EURO STOXX 50 inched up 0.1%, Germany’s DAX tacked on 0.1%, France’s CAC 40 added 0.1%, while London’s FTSE 100 dipped 0.25%.

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Euro Extends Decline On Greece Uncertainty, Weak Eurozone Data

The euro continued its slide against the other major currencies in European deals on Tuesday, after Eurozone inflation fell for the fourth month in a row in March, whereas jobless rate worsened more-than-forecast in February. Market participants are also worried about Greece debt talks, as the country will run out of money in three weeks unless it receive bailout finding.

Flash estimate from Eurostat showed that Eurozone inflation remained negative, with an annual decline of 0.1 percent in March. The index matched economists expectation.

The Eurozone unemployment rate worsened more-than-forecast to 11.3 percent in February, data from the statistical office of the European Union showed. Economists were forecasting a reading of 11.2 percent.

The currency has been in a negative territory due to lack of progress in talks between Greece and its creditors, in order to reach an agreement on reforms to release financial aid. Athens risks default on its financial obligations since it would run out of money by April 20.

The euro was lower against its major opponents, except the franc, on Monday. The EUR/USD pair fell by 0.5 percent yesterday, hurt by continued standoff between Greece and its creditors.

The single currency declined to 1.0712 against the U.S. dollar, its lowest since March 20. Continuation of the euro’s downtrend may lead it to support around the 1.05 zone. The pair ended yesterday’s trading at 1.0831.

The euro declined by 0.8 percent to hit an 8-day low of 0.7254 against the Sterling. If the euro extends slide, it may find support around the 0.72 mark. At Monday’s close, the pair was valued at 0.7312.

The pound received support after data showed that U.K. economy grew more than the prior estimate in the fourth quarter.

Gross domestic product grew 0.6 percent sequentially in the fourth quarter, revised up from 0.5 percent published on February 26, data from the Office for National Statistics showed.

Reversing from an early 4-day high of 130.25 against the yen, the euro slipped to an 11-day low of 128.64. The next possible downside target for the euro-yen pair may be located around the 128.00 area. The euro-yen pair was worth 130.03 when it ended Monday’s trading.

Data from the Ministry of Land, Infrastructure, Transport and Tourism showed that Japanese housing starts declined at a slower than expected pace in February.

Housing starts dropped 3.1 percent in February from last year, slower than January’s 13 percent decline and an expected decrease of 7 percent.

The 19-nation currency pulled back from an early high of 1.0484 against the Swiss franc, and edged down to 1.0445 in European trading. The pair was trading at 1.0476 at Monday’s close. Further weakness is likely to take the euro to a support near the 1.00 mark.

The euro declined to 4-day lows of 1.3652 against the loonie and 1.4346 against the kiwi, off early high of 1.3748 and a 5-day high of 1.4458, respectively. The euro is poised to find downside target around 1.36 against the loonie and 1.42 against the kiwi.

The euro moved away from an early session’s high of 1.4180 against the aussie, edging down to 1.4093. Next key support for the euro may be found around the 1.40 mark.

Looking ahead, Canada GDP for January, U.S. S&P Case Shiller home price index for January, Chicago PMI for March and U.S. consumer confidence index for March are set to be published in the New York session.

At 7:55 am ET, U.S. Federal Reserve Bank of Richmond President Jeffrey Lacker is expected to speak on Economic outlook in Richmond.

Danièle Nouy, chair of the ECB Supervisory Board, will deliver a speech before the European Parliament’s Committee on Economic and Monetary Affairs on Brussels at 9:00 am ET. At the same time, U.S. Federal Reserve Bank of Cleveland President Loretta Mester moderates a policy session at a conference in Stone Mountain, Georgia.

At 3:00 pm ET, U.S. Federal Reserve Bank of Kansas City President Esther George is expected to speak on the U.S. economy in New York.

by RTT Staff Writer

For comments and feedback: [email protected]

Business News

Euro Heads for Fourth Quarterly Drop

(Bloomberg) — The euro is set for the biggest quarterly slide versus the dollar since its inception and options trading indicates there’s more weakness to come.

In addition to a Federal Reserve that’s on track to raise interest rates, Europe’s 19-nation currency is being hobbled by the European Central Bank’s monetary stimulus and Greece’s struggle to secure bailout funds and avert a default. The euro slid on Tuesday even as a report showed Germany’s unemployment rate fell to a record.

The shared currency weakened against all but two of its 16 major peers this year as the ECB started its unprecedented 1.1 trillion-euro ($ 1.2 trillion) debt-purchase program. Across the Atlantic, output data may be understating the health of the American economy and employment numbers are a more reliable indicator, Fed Vice Chairman Stanley Fischer said at a conference on Monday.

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“The market is ignoring the improving fundamentals in the euro zone and focusing more on the policy divergence, with the expansion of the ECB’s balance sheet being an ongoing negative,” said Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. “The Greek situation continues to cause consternation,”

The euro fell 1 percent to $ 1.0729 as of 10:58 a.m. in London, after sliding 0.5 percent on Monday and losing 11 percent this year. It shed 1 percent to 128.76 yen, pushing its drop since Dec. 31 to 11 percent, the most since September 2011.

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German Jobs

Joblessness in Germany, Europe’s largest economy, fell to 6.4 percent in March from 6.5 percent last month, according to a Tuesday report. That was the latest in a set of data signaling business and investor confidence is recovering in the euro area amid plunging energy prices and a weaker currency.

The recovery signs haven’t stopped options traders from becoming more bearish on the euro.

They’re paying a 2.29 percentage-point premium for three-month options to sell the euro against the dollar over contracts for purchases, the most since Feb. 23 based on closing prices. That’s up from a 2015 low of 1.19 percentage point reached on Jan. 12, 25-delta risk-reversal rates show.

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Greek Prime Minister Alexis Tsipras, who came to power in January on a platform of ending austerity, was locked in negotiations with creditors over the terms of the country’s 240 billion-euro bailout.

He sought consensus in parliament for his efforts after proposals to reform the nation’s finances failed to satisfy his European partners. The standoff has left Greece dependent upon ECB loans and at risk of an exit from the euro.

To contact the reporter on this story: Lukanyo Mnyanda in Edinburgh at [email protected]

To contact the editors responsible for this story: Paul Dobson at [email protected] Paul Armstrong

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