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Forex Flash: Downside risk with the apparent push to go ahead with the Cyprus vote – TD Securities

FXstreet.com (Barcelona) - TD Securities analysts give away new updates in regard to Cyprus bailout. There are rumors that the Parliament vote scheduled at noon EST will not pass. “Negotiations have continued on the breakdown of the deposit levy, with the most recent plan one that exempts deposits <€20k/€20-€100k/€100-€500k/>€500k by 0%/6.75%/9.9%12.5%. The Cypriot President has said the government is making other plans if the vote fails, the central bank has said that ELA assistance supporting the banks will not end immediately, while other government comments still suggest the debate could start today but vote could still be postponed until later”, wrote analyst Richard Kelly, adding that room for debate on tweaks to the deposit structure is positive in the sense that it shows a compromise solution is not out of the question.

In the meantime, Merkel’s CDU/CSU is also expected to hold a meeting on Cyprus tomorrow and the Cypriot President has been in discussions with Russia. TD Securities analysts see few few alternatives available: “There has also been a proposal circulating that would combine a maturity extension for both depositors and sovereign bond holders. Deposits over €100k would be given the choice of converting that money into either 5y or 10y CDs, with a similar maturity extension to sovereign debt, which has helped reinforce some market angst”, Kelly wrote.

TD Securities analysts “think the Cypriot government and Eurozone officials are still keen to keep the options tied to the banking sector rather than sovereign debt” and see growing downside risk with the apparent push to go ahead with the vote, “but which may be a an attempt at putting political holdouts in the spotlight as responsible for the ramifications”.

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