Germany rejects Greek proposal

Greek government sent the widely expected request for extension of the bailout programme for another six months to negotiate a deal.

• The letter was sent on the back drop of the Greek Proposal, which we covered in our post "Key points of latest Greek proposal". They still reject the idea of bailout and would prefer to hold the negotiation over the next six months and to receive the remaining tranche of the current bailout.

• Germany has reiterated our view, that such deal will be difficult to agree on and went ahead to reject the Greek proposal, even naming it as a 'Trojan horse'.

• The Greek government has maintained this latest proposal as their last stand to negotiation.

• Nevertheless it is worth noting that the idea of extension has been floated in the market, what remain are the conditions to be attached from further negotiation. We expect this path to prevail.

Euro has taken a hit as the bears have extended their grasp after Germany's rejection. Though the EUR/USD pair still remains within its smaller range of 1.127-1.155, we expect the range to continue and even broaden to the larger one, 1.11-1.165 depending on the news flow. The pair is currently trading at 1.135. We are bearish on the EUR/USD over medium term.

The euro finance ministers will meet again today in Brussels to find a solution.