The euro gained some ground in early morning trade briefly breaking through key resistance after eurozone finance ministers finally sealed the details of a second €130 billion bailout package for Greece. There was also agreement on the details of Greek’s deal with private sector investors, who are now expected to take a haircut in excess of 53% of the face value of their debt holdings. It was previously thought that the haircut would be 50%. The debt swap will be financed in part via “sweeteners” that will be paid to the private bondholders, who will also get 30-year bonds in exchange for the bonds they give up. As a result of all the measures, it is estimated that Greece’s gross debt level (as % of GDP) will fall to “just over” 120% by 2020, from around 164% currently.

The euro rose as high as $1.3292 versus the dollar as the news emerged, its highest in nearly two weeks, before settling around $1.326. Meanwhile, versus the yen, the euro reached highs of Y106 before slipping back modestly. The agreement on the bailout programme, while long expected, will help Greece meet repayment needs next month. However, there are still many hurdles for EU policymakers which could keep the euro under some pressure.

Sterling has gained some ground versus the dollar, aided by the pick-up in the euro and generally improved market sentiment. Though its gains have lagged those of the EUR, the GBP is also being helped by some recent data which have pointed to signs of recovery in the UK. However, markets are wary of pushing the pound much higher given concerns that the Bank of England may yet pump more money into the economy.