Eurozone grants four months conditional extension to Greece

The Eurogroup reached an agreement with Greece for an extension of its bailout by four months, easing the concerns regarding the possible exit of the country from the Eurozone.

"Patience was stretched to its limits in the negotiations, but these ultimately seem to have led to a compromise situation in which a Greek exit from the euro area is avoided", said Christian Keller, at Barclays.

The agreement was made after weeks of heated exchanged between Athens and other European Union Finance Ministers. Head of the Eurogroup, Jeroen Dijsselbloem said that Athens had pledged to honour all its debts.

"This is a very positive outcome," he told a news conference on Friday night. "I think tonight was a first step in this process of rebuilding trust. As you know trust leaves quicker than it comes. Tonight was a very important, I think, step in that process".

Greece is expected to present a list of reforms to the officials from European Central Bank, International Monetary Fund and European Commission today.  The officials will then analyse the list to see if it's enough to pacify creditors and if they are dissatisfied, the deal could be scrapped.

Yanis Varoufakis, the Greek finance minister said Greece did not use threats or bluff during the talks. "The four-month period will be a time to rebuild new relations with Europe and the IMF", he added.

Without the deal, Greece would have faced the possibility of running out of cash as it has been locked out of the international lending markets. Its banking system deposits have been depleting at a rate of about €2bn a week. Moreover, the government finances have been further strained by the €1bn shortfall in revenues last month, as some Greeks delayed tax payments in the run-up to the election.

"It certainly looks like we're moving away from disaster. It should help a stress that has been building up in the market to be released", Sebastien Galy, a foreign exchange analyst at Societe Generale, told the BBC.

EUR/USD rose to 1.1411 at Asia's open from 1.1380 (NY close on Friday). However, its reaction to the EU-Greece deal was short-lived and was seen in a holding pattern in 1.1370-90 range. The markets still remain wary about Greece's future despite a conditional loan extension decision made last week. If Greece satisfies the troika with fresh reforms promises, the pair might get a boost.

"With a temporary deal on Greece in place we expect relative monetary policy to be in the driver's seat for the cross" said Flemming Nielsen, Senior Analyst at Danske Bank. "The first Fed hike is moving rapidly closer (we expect the first hike in June) and as the ECB launches its QE programme in March we look for further downside to materialise in the coming 6M".