Euro Falls on Greek Rescue Skepticism

By Omer Esiner of Travelex .

The U.S. dollar rose broadly on Monday as a weekend agreement on financial support for Greece was largely met by investor skepticism, weighing on the euro and overall risk sentiment.

Eurozone finance ministers along with the International Monetary Fund on Sunday agreed on a 110 billion euro (about $147 billion) aid package for Greece in exchange for fresh austerity measures to cut spending by Athens. The single currency initially rose in response to the record bailout for Greece. However, the common currency surrendered its gains on lingering doubts over whether Athens will be able to successfully implement its tough measures to stabilize the country's finances given strong public backlash. The austerity measures include fresh spending cuts and tax hikes over the next three years.

A London holiday on Monday contributed to generally subdued trading conditions. Sterling held on to its weaker bias ahead of Thursday's general election in the U.K. which many predict could result in a hung parliament for the incoming government.

The Canadian dollar firmed against the U.S. dollar early Monday, with oil above $86 a barrel helping to overshadow a pullback in investor sentiment.

EUR: The euro fell broadly on Monday, a day after the Greece rescue package. Under the plan, Greece's fellow eurozone neighbors would provide 80 billion of the total package with the remaining 30 billion coming from the IMF. The Greek rescue plan would provide the near-bankrupt nation with the rescue funds over the next three years.

Despite the bailout's hefty price tag, many investors question whether it would be enough to help fix credit concerns in the eurozone. Market participants also have their doubts over whether Greece will be able to stick to its harsh measures to improve its finances, given stiff public opposition to higher taxes and pay freezes. Each individual eurozone nation must now vote on Greek rescue which could come by Friday.

GBP: The British currency stayed largely on the defensive Monday, hurt by the decline in risk sentiment and by lingering uncertainty ahead of Thursday's general election. A close election campaign could pose a key challenge for the incoming government, if the winning candidate does not secure a decisive victory for the winner. The prospect of a hung parliament suggests the next government will have a hard time passing needed legislation to reduce the UK's ballooning fiscal deficits.