Last week it seemed as if we were about to endure a repeat of summers past, as yet another argument between Greece and the troika got underway while Portugal’s government teetered on the brink of collapse.
Now, those fears have eased. The Greek government is still divided on the latest round of spending cuts, but it seems that last-minute talks are likely to produce a resolution. We are now in the fourth year of the crisis, and Greece is still unable to survive without outside assistance. The weekend’s news is a painful reminder for any that thought the eurozone crisis was over.
Meanwhile in Portugal it seems that prime minister Pedro Passos Coelho has managed to put together a deal that will keep his government intact. Lisbon's ten-year bond yields have edged up this morning, but they remain well below the highs seen last week when an 8% yield for them seemed possible. Nonetheless, yields above 7% are unsustainable in the long-term for Portugal so they will be hoping market sentiment calms down in the coming week.
The EUR/USD currency cross has managed to hold above the lows seen in late May, when the $1.2800 was breached for a short time. However, this time round the line has held, suggesting that the combination of eurozone jitters and dollar strength has run its course for now. With risk sentiment on the rise across markets this morning the $1.2900 area might come back into focus in the coming days.