Failing to overtake the 1.3200 resistance level, the Euro fell to trade at 1.3106 in the New York morning amid fears ahead of the upcoming EU summit.  Although optimism has risen on recent developments regarding the Greek debt talks, there is still some skepticism regarding European Union members and their ability to come to an agreement.  This sentiment is likely to continue to weigh on the single currency until results – and comments – are released in the coming days.

Main topics of the current summit will include the disbursement of additional Greek aid, along with the ratification and creation of the European Stability Mechanism.  Discussions surrounding the ESM began late last year, but required full ratification among all of the European Union members.  Currently, the facility is expected to house about 500 billion euros in firepower – with further speculation that members will push Germany to back an increase of 250 billion euros.  With the measure likely to be finalized around the beginning of the summer, any signs of resistance by any member at this point could be damaging to the Euro’s current rebound higher.

Additionally damaging could be the discontinuance of currently running Greek aid talks.

Talks between Greek government officials and global creditors resumed in the middle of last week – after failing to provide a solution in the last two meetings.  However, speculation is now surfacing that both sides have come to an agreement, with creditors willing to take a 50% haircut on current Greek holdings – along with government officials conceding to a rate of 3.6% on swapped debt.  With private sector involvement – dubbed PSI – the agreement would lead to the country’s second bailout (in the amount of 130 billion euros) and help to pave the way for a the 14.5 billion euro payment coming due in two months.